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UBS analyst Robin Farley confirmed what travel agents have been seeing at the end of 2012: a strong fourth quarter. Farley draws from the UBS Cruise Data Tracker, which tracks average cabin prices for all sailings for the six largest North America-sourcing cruise lines and two of the largest European-sourcing cruise lines, totaling 8,000-plus sailings, and she said that 2012 is ending well for the cruise industry, with fourth quarter pricing up 19 percent over last year.
"We have previously noted that demand in the fourth quarter of 2012 is looking better than in the third quarter, partly because we have moved past the hole in bookings created after the Concordia incident (since there is generally a four- to six- month advance booking window)," she said.
The survey shows that the most pricing gain was driven by remaining inventory of fourth-quarter departures, as higher-priced holiday sailings become a disproportionate amount of inventory at this point, but it is still an incrementally positive sign for close-in bookings late in the quarter.
Farley noted that the Sandy disruption to November booking volumes may not necessarily have shown in the survey because cruise lines typically would not lower prices immediately when volume is disrupted by a short-term event.
"Pricing in our survey accelerated slightly over the past four weeks, after volumes were likely down in early November due to Sandy's impact on large feeder states in the Northeast," said Farley.
Royal Caribbean had stated at an investor meeting that they felt some disruption to bookings from Sandy, but management viewed it as short-term, not a point of concern. However, UBS sources indicate it took several weeks for bookings from affected regions to return to normalized levels.
The fourth quarter's strength followed generally better-than-expected third quarter results. Carnival Corporation & plc announced a net income of $1.2 billion, compared to 2011's third quarter $1.3 billion.
"The significant efforts of our brand management teams were successful in partially mitigating the decline in cruise ticket prices. Onboard revenue yields (constant dollars excluding Costa) improved three percent during the quarter," said Carnival Corporation chairman and CEO Micky Arison. "Our brand managements' continued focus on cost containment contributed to a 3 percent reduction in cruise costs (constant dollars excluding fuel) as well as a 6 percent reduction in fuel consumption on a per unit basis."
On a constant dollar basis, net revenue yields - net revenue per Available Lower Berth Day (ALBD) - decreased 5.3 percent for the third quarter of 2012, which was better than June guidance of down 6 to 7 percent. Excluding Costa, constant dollar net revenue yields decreased 2.1 percent for this year's third quarter, which was also better than June guidance of down 3 to 4 percent. Gross revenue yields decreased 9.2 percent in current dollars, driven by unfavorable currency exchange rates compared to 2011.
Norwegian Cruise Line saw operating income increase by 8.8 percent to $174.1 million in the third quarter of 2012, compared to $160.0 million in 2011. Net revenues increased 1.8 percent to $498.4 million primarily due to an increase in net yield, with increases in both ticket and onboard and other revenue.
"Posting these great results, despite the challenging economic environment in Europe where we had a record deployment, is a testament to the discipline and rigor instilled at Norwegian to continuously improve quarter after quarter," said Kevin Sheehan, president and CEO of Norwegian Cruise Line. "Our results reflect strategic pricing programs, benefits from process improvements and other enhancement initiatives, which resulted in a 9 percent improvement in operating income."
Royal Caribbean Cruises' third quarter found both close-in bookings and cost controls stronger than had been anticipated - with net yields up .1 percent on a constant currency basis and net income $367.8 million, compared to $399.01 million in 2011.
When reporting third quarter results, Royal Caribbean had stated that, although it was very early in the 2013 bookings cycle and visibility was limited, the company was encouraged by the trends so far. For 2013, booked load factors and average per diems are both slightly higher currently than at this same time last year, especially positive since the 2013 figures were prior to the January Costa Concordia incident, when 2012 was thought to be shaping as a blockbuster year for cruising.
"The strong third quarter certainly validates our confidence in our business model," said Richard D. Fain, chairman and chief executive officer of Royal Caribbean Cruises Ltd. "Strong close-in demand and our focus on costs drove substantially better results than expected. I am especially gratified that we are still seeing price increases in a year marked by so many external pressures."