How Carnival Cruise Line Makes Money: Cruises & Tours
Carnival Corp. (CCL) and Carnival Plc (CCL.L) operate a cruise line listed on the London Stock Exchange (LSE) and as a US depository (ADS) on the New York Stock Exchange (NYSE). The dual listed company operates as a single economic entity through contractual agreements between the two separate legal entities. Carnival Cruise Line is the company’s leading brand, offering year-round cruises to the Bahamas, the Caribbean and Mexico, as well as seasonal cruises to Bermuda, the United States, Canada, Europe and Australia. Its eight other brands are: Princess, Holland America Line, Seabourn, Cunard, AIDA, Costa, P&O Cruises Australia and P&O Cruises UK
Carnival faces direct competition in the cruise industry from Royal Caribbean Group (RCL), Norwegian Cruise Line Holdings Ltd. (NCLH) and Lindblad Expeditions Holdings Inc. (LIND). But as part of the broader travel and tourism industry, the company also faces competition from operators of hotels, resorts, casinos and theme parks. Carnival’s indirect competitors include The Walt Disney Co. (DIS), Las Vegas Sands Corp. (LVS), Marriott International Inc. (MAR) and Hilton Worldwide Holdings Inc. (HLT).
Key points to remember
- Carnival operates a portfolio of cruise lines offering year-round and seasonal cruises around the world.
- The company’s cruise operations in North America and Australia are its largest source of income.
- Carnival is gradually resuming guest operations on its cruise ships as the travel and tourism industry slowly recovers from the worst of the pandemic.
- The company’s Seabourn brand has announced the resumption of cruise operations from one of its ships from February 2022.
Carnival announced financial results for the third quarter of its 2021 fiscal year at the end of September, the three-month period ended August 31, 2021. Although the report shows improvement, revenue, net profit and operating profit of the company were considerably weaker than those of the company. before the COVID-19 pandemic began to spread around the world in early 2020. In the third quarter, Carnival reported a net loss of $ 2.8 billion, a slight improvement from the net loss of 2 , $ 9 billion recorded in the quarter of the previous year. Revenue increased more than 17.5 times to $ 546 million in the third quarter, rebounding significantly from last year. Carnival, which uses operating profit as a measure of profit for its individual lines of business, reported an operating loss that declined to $ 2.1 billion from $ 2.3 billion over the course of the same three month period a year ago.
Carnival’s core business, along with the rest of the cruise, travel and tourism industries, has been severely affected by the COVID-19 pandemic. The company ceased guest cruising activities in mid-March 2020. Eight of the company’s nine brands have resumed guest cruising activities and 35% of its capacity is operating with guests on board as of August 31, 2021. Carnival’s expects to post a net loss in the fourth quarter and fiscal 2021, which ends November 30, 2021.
Carnival business sectors
Carnival operates four distinct lines of business: North America and Australia Cruises (NAA); cruise operations in Europe and Asia (EA); Cruise support; and Tour and others. The company provides a breakdown of revenue and operating profit for each of these segments. Since all four segments recorded an operating loss in the third quarter of fiscal 2021, a separate pie chart for operating profit has been excluded from the above diagram.
Cruise operations in North America and Australia
The NAA cruise operations segment includes five of Carnival’s nine cruise brands. These brands, their total passenger capacity and the total number of ships as of November 30, 2020 are: Carnival Cruise Line with 66,400 passengers and 23 ships; Princess Cruises, 42,610 passengers and 14 ships; Holland America Line, 18,820 passengers and 9 ships; P&O Cruises (Australia), 7,230 passengers and 3 ships; and Seabourn, 2,570 passengers and 5 ships. The NAA segment recorded an operating loss of $ 1.3 billion in the third quarter of fiscal 2021, compared to an operating loss of $ 1.8 billion in the previous year quarter. Revenue for the quarter increased more than 18-fold to $ 271 million, or nearly 50% of the company’s revenue.
Cruise operations in Europe and Asia
EA’s cruise operations segment includes Carnival’s other four cruise brands. These brands, their total passenger capacity and the total number of ships as of November 30, 2020 are: Costa Cruises with 34,980 passengers and 11 ships; AIDA Cruises, 31,930 passengers and 14 ships; P&O Cruises (UK), 19,020 passengers and 6 ships; and Cunard, 6,830 passengers and 3 ships. The EA segment recorded an operating loss of $ 696 million in the third quarter of fiscal 2021, compared to an operating loss of $ 465 million in the previous year quarter. Quarterly revenue increased from – $ 4 million in the last quarter of last year to $ 232 million, representing more than 42% of Carnival’s total revenue.
The Cruise Support segment comprises Carnival’s portfolio of port destinations and other services, which support the Company’s cruise brands. The segment recorded an operating loss of $ 94 million in the third quarter of fiscal 2021, compared to an operating loss of $ 86 million in the previous year quarter. Revenue for the quarter increased 14-fold to $ 14 million, or less than 3% of total revenue.
Tower and other
The Tour and Other segment includes Carnival’s travel company, Holland America Princess Alaska Tours, which operates in Alaska and Canada’s Northwestern Yukon Territory. The travel agency owns and operates hotels, lodges, glass dome wagons and buses. It complements the company’s cruise operations in Alaska. The Tower and Others segment recorded an operating loss of $ 10 million in the third quarter of fiscal 2021, compared to an operating loss of $ 11 million in the previous year quarter. Revenue increased 40.0% year-over-year (YOY) to $ 28 million, representing about 5% of the company’s revenue in the third quarter.
Recent Carnival Developments
On September 29, 2021, Carnival announced that the Seabourn Encore cruise ship will resume service on February 19, 2022, approximately two months ahead of schedule. The ship is part of the operations of Seabourn, the company’s ultra-luxury ocean travel and expedition brand. The Seabourn Encore will offer a series of 10 and 11 day itineraries to the Canary Islands and the Mediterranean from Lisbon, Portugal. The return of the Seabourn Encore will be the third ship in Seabourn’s fleet to resume guest operations.