As vacationers hoarded snacks and human waste dribbled down the walls of last year’s “cruise from hell,” many expected Carnival, the world’s biggest cruise operator, had suffered a business-wrecking hit.
But new numbers show the stink from the cruise line’s high-profile disaster last year has already begun to fade. Carnival just logged one of its best summers in history, beating projections by posting nearly $5 billion in sales of tickets, tours and on-board goodies. It’s on track to earn $16 billion in sales this year, breaking a company record.
Many more people bought tickets, with Caribbean cruises booking nearly 20 percent more guests this summer than the year before, company filings show. And once those cruisers were sailing, they spent nearly 10 percent more on things like vacation trinkets and fruity drinks.
The good fortunes for the vacation giant that was so recently a laughingstock surprised not just analysts, but Carnival itself. Chief executive Arnold Donald said Tuesday on a conference call that the cruise line’s “recovery is probably a little faster than we had a right to believe it would be.”
Last year was one nightmare after another for Carnival, the $31 billion cruise behemoth that runs its namesake cruise line and 10 other big-ship brands worldwide. A fire in the Carnival Triumph’s engine room in February stranded the ship’s more than 4,000 passengers and crew for four days with no power or running toilets, turning the floating resort into a “hot port-o-potty.” A month later, mechanical problems aboard the Carnival Dream and Carnival Legend led the cruise line to cancel scheduled stops and, in the Dream’s case, fly passengers back home.
In the months since, Carnival has emptied its pockets and cranked up its marketing to win back grossed-out passengers. The cruise line spent $300 million installing emergency generators and upgrading ships’ safety systems, convened a board of outside experts, including two retired U.S. Navy rear admirals, to review the fleet, and built new rum pubs, game shows, cocktail bars and water slides through an initiative they called “Fun Ship 2.0.”
The Miami megafirm also slashed ticket prices – by more than $80 million in one quarter last year, according to corporate filings – and offered cruisers full refunds, plus 10 percent on top, if they didn’t leave satisfied. All the spending and cutting, though, carved deeply into their profits: The cruise line is expected to pocket $1 billion less in profit in 2014 than it earned in 2008.
Carnival has bounced back from messy vacation fiascos before. In 2010, the same year an engine fire stranded the Carnival Splendor off San Diego’s coast, the company reported an 11 percent jump in income over the previous year.
YouGov BrandIndex said last year Carnival suffered “one of the steepest drops in consumer perception for a brand” since BP and the Gulf oil spill. But index analysts now say in their mid-year report that “no company has made greater strides in perception than Carnival.”
The cruise line’s breezy summer was fueled by big growth in China, which executives said could one day become the “largest cruise market in the world.” As for now, though, Americans rule the seas: Half of the 21 million cruise passengers this year hail from the U.S., data from Cruise Lines International Association show.
Next year could prove tougher for Carnival, which will have to drydock many of its ships to upgrade fuel systems and install exhaust-cleaning “scrubbers” to meet new pollutant rules, dinging Carnival’s revenue. But analysts said the cruise line will likely continue to leave the worst of its “poop cruise” days behind – as long as it can avoid another embarrassment.
“It just takes time to get the confidence back from the cruising customer that they’re not going to have some horrible experience,” said C. Patrick Scholes, a senior lodging and leisure analyst with SunTrust Robinson Humphrey. “The best thing they can do is stay out of the news.”
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