Business Monday

CRUISE INDUSTRY

After rough year, Carnival hopes for calmer waters

 

The world’s largest cruise ship company has grown its business and generated profits over five years of ups and downs; executives are hoping for fewer downs in the future.

More information

Carnival at a glance

Employees worldwide: 90,000

Employees in South Florida: 2,800

Brands: 10

Ships: 100

Revenue: $15.4 billion in fiscal 2012

Profits: $1.3 billion in fiscal 2012

Market cap: $28.7 billion


hsampson@MiamiHerald.com

After boarding the latest addition to the Carnival Cruise Lines family, Josh Beaver sampled lasagna at the new onboard Italian restaurant, downed some drinks with his traveling companions and hit the water slides while the afternoon was still young.

“So far, from what I’ve seen, there’s lots to do,” said Beaver, 33, of Holden Beach, N.C.

The Carnival Breeze hadn’t even left PortMiami yet on a recent Saturday, and already it buzzed with vacationers exploring all there was to do: nosh on a Pig Patty from the new Guy’s Burger Bar, make friends with bartenders at the new RedFrog Pub or check out a novel and a glass of the grape at the new Library Bar.

Here aboard one of the largest ships in the biggest brand of the Number One cruise ship company in the world, there was little hint that the last year was one of the toughest in the 41-year history of parent company Carnival Corp. & plc.

Last year got off to a catastrophic start when Costa Concordia, owned by Carnival unit Costa Cruises, struck rocks in Italian waters as the captain steered the ship on an unauthorized route. The massive liner listed to one side, and 32 people died in the chaos that followed.

“When you lose lives, it’s heartbreaking,” said Carnival Corp. Vice Chairman and COO Howard Frank, who devoted much of his time last winter handling the aftermath with Costa leaders. “And so I think in terms of our emotional reaction to it, it’s been the toughest year we’ve had.”

Carnival Corp. Chairman and CEO Micky Arison took criticism for not going to Italy following the wreck, but said he believes the company did the right thing and doesn’t second-guess his actions.

Financially, the company took a hit as well, starting with discounts that were necessary to drum up business after the accident. Costa’s future bookings plunged, but picked up after the operator slashed prices. As of mid-December, prices at Costa remained lower than they were a year earlier, though the company expects that to change once the anniversary of the accident passes.

“I think we’ve been consistent in saying the recovery at Costa is not a one-year issue,” Arison said during the December earnings call with analysts. “It’s going to be multiple years, and we are forecasting a recovery of about half the yield deterioration.”

The ship remains on its side off the island of Giglio; it’s expected to be removed by the end of summer.

A flurry of civil lawsuits have been filed, but none have reached trial yet; the company has reached compensation agreements with 70 percent of the more than 3,000 passengers who were not physically injured and 60 percent of injured passengers and families of those who died.

As the company and broader industry focused anew on safety, the summer months presented a fresh set of problems when the European economy weakened just as cruise lines were stationing more ships in the Mediterranean. While North America was immune to those concerns, the run-up to the Presidential election and the fiscal cliff debates prompted Carnival to worry about a slowdown in business at home.

Last month, Carnival forecast 2013 earnings that were lower than expectations and said advance bookings for the year were behind what they were a year earlier at lower prices. Many analysts believe the projections were conservative, though, and executives said they were hopeful that January would bring more robust business.

Read more Business Monday stories from the Miami Herald

Miami Herald

Join the
Discussion

The Miami Herald is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

The Miami Herald uses Facebook's commenting system. You need to log in with a Facebook account in order to comment. If you have questions about commenting with your Facebook account, click here.

Have a news tip? You can send it anonymously. Click here to send us your tip - or - consider joining the Public Insight Network and become a source for The Miami Herald and el Nuevo Herald.

Hide Comments

This affects comments on all stories.

Cancel OK

  • Videos

  • Quick Job Search

Enter Keyword(s) Enter City Select a State Select a Category