The comeback in cruising is here, but it’s undoubtedly returning slower than many cruise companies would like.
To be sure, no one predicted that cruising would return overnight. Comparisons to turning a dimmer switch gradually instead of a light switch suddenly turning on were often made when speaking about the return of sailing.
However, roughly nine months since the first ship sailed again from the United States, cruise lines are still seeing a gradual return of passengers and ships. Between the challenges of manning crews across dozens of ships and both the massive Delta and Omicron waves of the pandemic, the full return of cruising has been pushed back.
Case in point: Carnival Corporation — the parent of Carnival Cruise Line, Princess, Costa, and others — just released a quarterly update to investors.
Within that update, the company says that as of now, 75% of its capacity has resumed passenger sailings.
However, occupancy — the number of people occupying available cabins — is still relatively low. In the first quarter 2022, Carnival Corporation said its occupancy was 54%.
For comparison, the average occupancy in 2019 (the year before the health crisis) was at 106.8% across all its ships. A figure above 100% means some cabins had more than two people, such as a family sailing with kids.
“During the first quarter 2022, as a result of the Omicron variant we experienced an impact on bookings for near-term sailings including higher cancellations resulting from an increase in pre-travel positive test results, challenges in the availability of timely pre-travel test, and disruption that Omicron caused on society during this time,” said Carnival Corporation Chief Financial Officer David Bernstein.
“All of this inhibited our ability to build on our cabin occupancy booked position for the first quarter 2022, during the first quarter, resulting in occupancy during the first quarter 2022 at 54%, being lower than the 58% occupancy we achieved in the fourth quarter 2021,” he added.
At first glance, that sounds like Carnival’s business took a downturn.
In reality, the company carried over 1 million passengers, marking a nearly 20% increase from the previous quarter. With more ships back sailing, the company was able to carry more passengers, despite the lower occupancy level.
Occupancy Trends Improving Quickly… With More Spending
The good news is that as Omicron subsides, the outlook is improving.
Carnival Corporation CEO Arnold Donald shared that in March so far, occupancy levels are closer to 70%. In addition, the company has also seen more than 40 sailings with occupancy of more than 100%. On top of that, Carnival says that recent weekly bookings have been at higher volumes than at any point since cruising restarted.
Assuming that there are no more serious waves of Covid, it certainly seems that the days of ships sailing at sharply lower capacity may be near their end.
If so, then the fortunes of companies like Carnival could see a dramatic turnaround. For instance, in the most recent quarter the cruise giant reported a loss of $1.9 billion. That’s in addition to a loss of $9.5 billion for 2021.
However, as more passengers come back to sailing, they are opening their wallets wider. Carnival says that revenue per passenger cruise day was up 7.5% during the most recent quarter, driven by “exceptionally strong onboard and other revenue.”
“As we get to full occupancy, and we carry more kids in the summer, you could see the per diems maybe will change a little bit,” Donald said. “But overall, the spending is significantly up and has continued to be so far.”
In other words, if cruising can continue its comeback without more disruptions, then full ships with passengers spending more money points to better days ahead.
