Carnival Corporation & plc, the world’s largest cruise shipping group, cut its earnings forecast for the 2019 financial year in its second quarter interims, citing ongoing headwinds faced by the company's Continental European brands as a key reason.
Carnival’s key brands on the Continent are Costa Crociere, which sells its cruises in virtually all over Europe (plus elsewhere, too) and AIDA Cruises, which caters for the German speaking market.
The Continental European market produced more than 4.0 million passengers in 2018 out of a global market of just under 30 million passengers. The principal Continental European source markets were Germany, with 2.2 million, Italy 0.8 million and Spain and France both 0.5 million passengers, according to CLIA figures.
The Italian economy, which is important for Costa Crociere, has been struggling for a long and the country’s GDP contracted by 0.1% in the first three months of the year compared to the same period in 2019. On the previous quarter, the figure grew by 0.1%
Italy is a major market for Costa Crociere, so a weak home market is bad news to the company. It also operates in a rather low price point, which makes it vulnerable to competition from attractively priced land based holidays.
AIDA Cruises is not a budget offering, but it has grown its fleet rapidly over the past several years as has TUI Cruises, its Hamburg based competitor. Neither company has a further newbuilding due before the next AIDA vessel in 2021 and the break in capacity growth may come at a good time.
German economy has lost momentum in recent times and on 17 June, the Bundesbank revised down its 2019 GDP growth forecast to a mere 0.6% from an earlier forecast of 1.6%. Its 2020 forecast was cut to 1.2% from 1.6%.
Meanwhile, TUI Cruises, which is jointly owned by Royal Caribbean Cruises, Ltd (RCCL) and TUI AG, said in in its second quarter interims release that the average daily rate the cruise line had obtained decreased by 0.8% to €146, year-on. In the first six months of its financial year, the decrease had been 0.3% to €148.
Going forward, the average daily rate of TUI Cruises will probably be an indicator worth looking for, at least when it comes to the assessment of the health of the German market.
