Monday, 9 June 2014

Carnival Corp. CEO: Competitors' newbuilds may hurt pricing

Carnival Corp. CEO: Competitors' newbuilds may hurt pricing

By Tom Stieghorst
MSC Cruises' order book of four big new ships is an example of a trend that could spell trouble for an industry struggling to raise prices, Carnival Corp. CEO Arnold Donald said.

"We'll have to see how it all plays out," Donald said in a recent teleconference with reporters. "In an ideal world, you wish it wasn't happening."
Arnold DonaldDonald was not singling out MSC's expansion for criticism, but he happened to be making his comments on the day the line ordered two 4,170-passenger ships. That came on the heels of an order for two 4,500-passenger ships, part of a plan to double MSC's capacity by 2022.

Asked how prices can rise if Carnival Corp. restrains its own brands' capacity growth while other lines don't, Donald said he was confident that Carnival's strategy was sound. It includes incremental growth in onboard revenue and ticket prices spread over 78 million passenger days, coupled with shrinking expenses by employing best practices culled from its 10 brands.

But, he said, if any competitor resorts to "super-aggressive pricing" to fill its ships, "then it can become a problem for the industry."

Donald said travelers come to view the industry's lowest prices as a gauge of how much they should pay for any cruise.

"People say, 'I'm not going to go on that ship, but cruises only cost this much, and I don't want to pay more than that because I don't want to get ripped off.'"

On the other hand, he said, the upside of new capacity is more attention being paid to cruise products.

"It just allows them the opportunity to put cruise front and center, to help all of us close on [those] new to cruise," he said.

MSC Cruises USA President Rick Sasso said that the real pricing stress this year has been in the Caribbean and that MSC wasn't the initiator of the fare discounting there.

"It should not be a surprise to anybody that we've been successful and we're going to continue to invest in our brand," he said.