While second-quarter performance shows an increase in bookings and an increase in occupancy for cruises, Carnival Corporation is optimistic about the future of the cruise line.
Even with the threat of a looming recession, Carnival Cruise executives and analysts believe the cruise line is well positioned to weather any economic downturn.
While certainly not recession proof, Carnival’s management team expressed confidence in the company’s long-term prospects. That’s partly because of the pandemic’s pent-up cruise demand.
In a June 24 quarterly earnings call, new Carnival Cruises CEO Arnold Donald said the cruise line is understandably recession-proof in the current economic environment. Arnold said: “The positive thing here is that there is pent-up demand. And so even if there was a global recession, the reality is that we are, as I said in my comments, historically resilient to recession.”
Increase in demand for cruises
Cruise lines have arguably been the hardest hit of any travel industry during the pandemic. With the CDC suspending cruise ship navigation for nearly a year and a half, the industry has seen a steady recovery.
The adaptation of onboard health protocols and policies has ensured the safe return of the cruise even as the COVID-19 virus continues to circulate and evolve. This is also due to the accessibility of new treatments and the ready availability of effective vaccines.
Carnival Cruise also credits an overall shift toward long-term management of the virus as a contributing factor to the cruise industry’s positive outlook. Second-quarter reports showed the cruise line had reached an inflection point, with cash flow finally turning positive, signaling a bright future for the cruise line, regardless of the economic uncertainty facing cruise lines. Americans today.
Donald continued: “If there was a recession, there’s a huge pent-up demand, which wasn’t necessarily the case in the past, because it’s been a few years since people have been able to travel the way they wanted it.”
The ease of travel restrictions also proved helpful to Carnival’s financial recovery and further boosted demand. Given the positive trend in booking volumes, it’s clear that people are keen to travel more than ever.
In this way, Donald said: ‘And as the world continues to relax and get comfortable with managing the virus and restrictions are eased, we see things moving more in the direction of the Carnival brand where things are more normalized even though there are still restrictions at the moment.”
Value experiences
In addition to the pent-up demand for cruises, Donald also cites the fact that people have a new appreciation for shared experiences with friends and family after the pandemic has disrupted daily life. Not to mention that Millennials and Generation Z place an increased importance on spending disposable income on travel more than any other generation.
Donald shared, “And that’s even more true in today’s environment where people are prioritizing spending on experiences over spending on things.”
Even with previous cycles and economic downturns, American workers continue to crave a vacation and an escape from reality. As the pandemic continues to linger, Americans are coping with escape and enjoying long-awaited time with friends and family.
Donald continued, “I strongly believe in our business and our ability to create happiness by providing unforgettable and much-needed vacations for our customers. This need is even greater in today’s environment given the stress of the past 2 years and the value we all place on shared experiences with friends and family.
A solid labor market
Carnival executives further underscored their confidence in the company’s future, citing the effects of a strong labor market. With unemployment rates in the United States reaching record highs, many American workers are exhausted and in desperate need of a vacation.
The company’s occupancy trends confirm this, as Carnival ships were sailing at nearly 90% occupancy in June compared. Forecast ahead shows cruise line operating at 110% capacity in coming months
David Bernstein “we are in a very strong labor market right now. And given that, if people have a job and they feel comfortable in their work, they will probably need a vacation. And remember , vacations are no longer a luxury, they are a necessity in today’s world.”
