Cruise News
Is the bottom falling out of cruise market?
Cruise firms who pushed ahead with their new ship orders have been giving a dressing-down by a leading US analyst on Wall Street.
Mr Steven Kent from Goldman Sachs, reported in US Today newspaper, that the cruise industry have made a mistake in not postponing or cancelling orders, as the world falls deeper into recession.
Mr Kent’s rebuke comes hot on the heels of reports that Gordon Brown’s Government will take on all of the UK’s Banks “toxic” debts.
"Cruise companies should have been more aggressive (this past year) trying to cancel or at least delay the out-year ships," Kent says, noting that the hotel and casino industry, by contrast, has been slashing building as the economy worsens.
Even the huge Carnival and Royal Caribbean groups will have to search high and low of the best credit lines in order to meet the billions of dollars worth of ships on order, which are due for delivery up to 2012. Mr Kent said: “people who own cruise sticks should get out now”. He told US Today.
Back in October CEO of the world’s biggest cruise operation Carnival, which owns the UK’s P&O Cruises and Cunard line, said he didn’t think it was an option.
Kent went on to say: “Cruise companies expectations for income are way to high given the deteriorating worldwide consumer, and supply hitting the market, cruise operators desire to fill these ships at any price, and a high exposure to more expensive Europe / Alaska cruises at the wrong time.”
P&O witnessed this first had over the festive season when hundreds of pre-booked passengers cancelled at the last minute, forcing P&O to dump cabins into the market place as lost leaders.
Carnival has 11 ships worth nearly $7 billion scheduled for delivery over the next two years.
"We don't have contractual options to delay any of these ship deliveries," Arison noted on a press conference call towards the end of last year.
As reported by Holidayinsiders.com last year, Norwegian Cruise Lines has already cancelled one of its new 4,200-passenger orders which were due to sail in 2010.
Seatrade, a well respected industry insider, has reported MSC Cruises is also renegotiating several ship orders.
Comments
The difference between cruise lines and hoteliers is that the former know how to fill their beds and the latter have proved repeatedly that they have little clue. This is why cruise companies continue to do relatively well through downturns and hotels stand empty. Analysts like this one have repeatedly misunderstood this - not to mention the difference between the cruise industry building just 8-10 ships a year and hotels developers planning 100s around the world. For this reason and this reason only, cruise stocks are downgraded. It is time someone looked at the year-end results and realised that cruise stocks are permanently undervalued.
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