I’ve always been fond of the quotation “the law of flotation wasn’t discovered contemplating the sinking of things.” This has certainly held true for the cruise industry – growing the annual number of passengers carried nearly 5 times over the past 20 years. But with over 9,000 sailings worldwide in 2012 the odds of something going wrong somewhere do increase.
Traditionally I have considered the media coverage of cruises ships to be somewhat lopsided. I imagine there are plenty of things going on over the course of a year throughout hotel rooms in Las Vegas for example – but we tend not to hear these stories. By contrast, we do readily hear about the occasional sick cruise ship passenger, bad smell or overboard suicide.
My heart goes out to the passengers and families on Concordia’s sailing. This is a terrible tragedy by any measure. Without diminishing these human experiences, the recent events of the Costa Concordia will at the very least have an impact to Carnival’s near term bottom line, something Cruise Market Watch can measure.
For the Costa Concordia, remaining sailings in Carnival’s First Quarter (Q1) 2012 would have brought in an estimated total of $15.8 million in ticket revenue. For Q2 the impact will be in the order of $47.4 million in ticket revenue, Q3 $63 million and Q4 $45.9 million. Concordia was booking considerably higher prices during the summer (June, July and August). In a “back of the napkin” estimate that assumes the lost ticket revenue falls straight out of the bottom line this would equate to about .02 cents in Q1 earnings per share and .05 cents in Q2. The loss to earnings from the Carnival Splendor incident was .07 cents per share in a single quarter. Things we can’t measure include – what will be costs of raising and repairing the Concordia and when will she sail again? Will those who have already booked future sailings on Concordia transfer their vacations to other ships? What will be the legal actions and operational changes? We will have to wait to hear guidance from Carnival. Update: 12/30/2012 Carnival guided loss be in the range of $155-$175 million after a booking slow down in the mid teens. This news came after initially guiding $85 to $95 million lower (or .11 cents to .12 cents per share) on 12/16/2012.
Fortunately, ship builder Fincantieri has ship yards located right in Italy. Any near term impact to ticket pricing across Costa and other cruise brands will likely correlate with the duration of time in which the story continues to garner news headlines and cruise brands keep their wave season ad campaigns off the television. Pricing impacts will continue to be closely watched.
Related articles
- Costa Concordia Luxury Cruise Ship Runs Aground Off Coast Of Tuscany, At Least 3 Bodies Retrieved From Sea (huffingtonpost.com)
- Costa Concordia Evacuated (cnd-cruiseblogger.blogspot.com)
- Nations seek answers over Italy cruise accident (msnbc.msn.com)
- Italian prosecutors detain captain of Costa Concordia cruise ship: report (vancouversun.com)
- Cruise ship runs aground off Italy (seattletimes.nwsource.com)
- Tragedy as Costa Concordia Runs Aground (cruisetalk.org)
- Cruise Ship Costa Concordia Sinks off Italian Coast [VIDEO, AIS Track] (gcaptain.com)
- 2 bodies found on wrecked cruise ship (cbsnews.com)
- Potential Punitive Damages from Costa Concordia Cruise Crash in Millions (cruiseindustrywire.com)
Lost ticket revenue is an insufficient measure of total lost revenue. Even a cursory examination of Carnival Corps.’ 2010 annual report (page 5) clearly shows that “Onboard and other”, a measure of the amount spent onboard by passengers, is far and away the greater profit producer. Indeed, absent “Onboard and other”, Carnival Corp. would have lost money in 2010.
It is premature to speculate on salvage of Concordia. Salvage cost is certainly a consideration but the stigma attached to the ship almost certainly means consideration of changing the name (although it could be argued that would likely be of limited utility).
Good point Charlie, there is onboard revenue that would be lost beyond ticket revenue, but there is also onboard expense that would be saved. Carnival just provided updated guidance for loss of use to be in the range of $85-$95 million or .11 cents to .12 cents per share. http://www.sacbee.com/2012/01/15/4190934/carnival-corporation-plc-required.html
I think that it’s easy to say when the Concordia will sail again: unfortunately never. The Concordia is lost. In the future we will see if the ship will be taken in a shipyard and dismantled , But I fear that the only think that will be possible to do is take the wreck far from the isle and leave it to sink. Maybe, after a drainage, it possible to sink the ship in a place where sub could be explore it, like a giant on the bad of the sea.
Based on what occurred to the SS Normandie at Manhattan’s Pier 88 on 9 February 1942 you might be correct. However, I believe in this case at some expense the ship will be salvaged and given new life ala the Ship Amongst Ships. This will be no small undertaking – as the salt water will ruin all the electronic wiring pulled through the ship for example, but there is much that can yet be saved.