Travel industry: appetite for luxury and sea

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Sabine and Martin Kitt flew to New York for just under a week to see the city and its sights. The German couple took the luxury ship Queen Mary 2 back to Southampton. “When you cross the Atlantic, the boat trip is incredibly relaxing. It’s so difficult to get to,” says tax consultant Kitt with a wink. “There is gigantic food, the gastronomy is at its finest,” he enthuses.

Kitt enjoys it, goes to the cinema, attends lectures. It is his third voyage on Queen Mary 2, this time he has booked a balcony stateroom. The experienced cruiser pays the equivalent of 1,200 euros per person for seven days. Apart from alcohol everything is included. The ship belongs to the Cunard Line shipping company along with two others. The parent company, the British-American Carnival, is the largest cruise company in the world. Well-known brands such as Aida, Princess Cruises or Costa Crociere are among them.

The giant has been struggling to survive for the past two years. Business came to a standstill during the pandemic, the board of directors reduced the fleet, which originally numbered over 100 units, by 26 ships and cut jobs. There were no grants or aid from the US authorities, such as for US airlines – also because Carnival’s structure is nested with a double seat in Miami and British Southampton. Critics accuse the group of tax optimization. But other large shipping companies did not receive any aid from the US state either.

Instead, the Arison founding family brought the Saudi sovereign wealth fund on board with a capital increase in spring 2020. With 5.1 percent, the Saudis are now one of the largest shareholders alongside Micky Arison. The 72-year-old boss holds 8.7 percent of the shares. He expanded the company, which he took over from his father, from two to over 100 ships within three decades.

Booking record in early April

The latest booking figures for the Primus show that Carnival is picking up speed again. In 2020, the group had a handful of ships in operation, by the end of 2021 there were 57. At the beginning of April, Carnival, which was founded 50 years ago, recorded the strongest booking week in its company history. In November, the Americans will put their newest ship, the 344 meter long Carnival Celebration, into operation in Port Miami. According to its own statements, Carnival should have 94 ships by the end of June.

World trip fully booked in 30 minutes

The much smaller rival Norwegian Cruise Line is experiencing a similar spirit of optimism. CEO Frank Del Rio recently ordered nine more ships, which are to be delivered by 2027 and will strengthen the fleet, which currently consists of 28 units. Del Rio relies on the marketing skills of his crew. And they have it all: The subsidiary Oceania Cruises, for example, sold a 180-day world cruise for the year 2024 in its entirety within 30 minutes after the start of sales on March 2nd. This and other offers recently brought the company a booking record that exceeded the previous record from September 2021 by almost twelve percent.

This is hardly surprising, since many regular customers are starving for luxury cruises after the pandemic years. The industry is also helped by the fact that most countries around the world are relaxing their corona restrictions. Tour operators are reporting significant increases in bookings for the spring and summer seasons. According to the World Tourism Association WTTC, the important US travel market is expected to reach the pre-pandemic level in the current year with sales of almost two trillion dollars. “The recovery should accelerate significantly this year, according to our most recent forecast,” said President Julia Simpson.

However, the cruise industry is lagging behind, and the recovery was met with setbacks due to the particular risk. After all, in the case of Corona, all passengers are literally in the same boat. Ship guests and staff have repeatedly become infected with the highly contagious omicron variant. Some shipping companies had to cancel trips and change routes. However, the number of cases is extremely small. Since cruises resumed in the US in June 2021, the world’s number 2, Royal Caribbean, has carried 1.1 million guests by the end of December. 1745 tested positive – a rate of just 0.162 percent. This is because almost everyone on board was vaccinated and had to prove a negative test before boarding, the company said.

The virus has not spoiled the wealthy regular guests’ anticipation of the enjoyable cruise. On the contrary: Many wealthy seniors want to continue to spend a lot of time in their retirement on luxury ships, as a survey by the US industry portal Cruise Critic among experienced cruisers at the end of 2021 showed. Around two thirds of the more than 5,000 respondents had booked a trip at the time, the majority want to set sail in the first half of 2022. In particular, trips from North America to the Caribbean remain popular with Americans. In order to be able to meet the demand, shipping companies are investing heavily in new capacity. The industry giants Carnival, Royal Caribbean and Norwegian Cruise Line alone are launching 16 new luxury liners this year.

billion sunk

Market leader Carnival has every reason to be optimistic. In the business quarter from December to February, the Primus increased the number of passengers carried by almost 20 percent. At the same time, revenue per cruise day and passenger increased. “We have worked hard to resume operations as a stronger and more sustainable company. We aim to achieve double-digit returns on invested capital over time,” says Carnival CEO Arnold Donald.

However, the losses are still high, alone in the first quarter there were 1.9 billion dollars. Follower Royal Caribbean, which also operates the TUI Cruises joint venture with TUI, burned almost $1.4 billion in the fourth quarter with its 63 ships. Boss Jason Liberty remains hopeful, so 2022 should be a “strong transition year”. The group, like its competitors, is putting the rest of its fleet back into service.

Meanwhile, on the Cunard shipping company’s Queen Mary, the Kitts are enjoying the deep blue and vastness of the ocean. “You read on deck and all is right with the world,” says Martin Kitt. And the passenger has another tip for German cruisers: If you book through a US portal such as cruise.com or cruisedirect.com, you usually travel cheaper than on German websites.

The Miami empire markets three global brands: Royal Caribbean, Celebrity Cruises and Silversea Cruises. Analysts are extremely confident. Ten experts recommend a “strong buy”, seven a “buy”, only five recommend the share as a hold position. The number 2 in the industry should significantly reduce its losses in the current year and steer full steam ahead into the profit zone in 2023. On average, Wall Street then expects earnings per share of plus $5.73 after minus $3.97 in the current year.

Investor info

The industry leader is a real giant, last year a total of 65,000 crew members looked after over 1.2 million guests. At the turn of the year, the world market leader had 9.4 billion dollars in cash in its treasury, but the group was indebted many times over. Analysts are forecasting significantly lower losses for 2022, and from 2023 they will see significant gains again. wait for the bottom to form.

With a stock market value of around nine billion dollars, the American group based in Miami is quite small compared to the top of the industry. The share is considered comparatively cheap. The well-known US fund manager and value investor Bill Miller holds a package worth around 100 million dollars. Analysts expect sales to grow by around 13 percent in 2022. From 2023 there should be profits again. As an admixture.

Image sources: Carnival Cruise Line, TUI Cruises GmbH