Carnival Corp. Expands Fleet, Focuses on Chinese Cruisers

Carnival Corporation announced plans last week to expand its fleet with nine new-build, next-generation vessels over the next seven years.

While the company isn’t sure which brand each ships will serve, it is planning on using its new-builds to tap into the nascent market of Chinese cruisers.

“Some of those ships will be purpose built for China,” said Arnold Donald, Carnival Corp. chief executive officer, on the company’s latest investor relations call. “China is definitely a market that will be receiving some of those new ships.”

The new ships are set to enter service between 2019 and 2022. Five will be built by the Fincantieri shipyard and four will be built by Meyer Werft. The terms of the agreements and the overall cost to Carnival, has not yet been disclosed.

Two ships have already been ordered for delivery in 2018, as part of the Carnival Cruise Line and Holland America Line brands.

“It averages out to be two-to-three ships per year, which reflects our commitment to measured capacity growth,” said Donald.

Looking East
When asked, Donald said the advance order of so many ships is the new reality of the logistics of designing, building and testing ships with a new concept.

“These times just require more forward planning [than before],” said Donald. “It’s to our advantage to communicate with the yards and have a long term plan. We also included a new ship design, and that requires the additional plans and prototypes.”

The new design also will aim to be the company’s most efficient yet.

The Chinese cruise market is growing by leaps and bounds, according to Donald.

“China expects to surpass one million cruise passengers in 2015,” he added. “It’s just a matter of time until China becomes the largest cruise market in the world.”

Mass-market lines have begun to flock to Asia.

Royal Caribbean Cruise Line, for example, just announced it will homeport the upcoming Ovation of the Seas in China along with the Quantum of the Seas, making it the first major North American cruise line to deploy new-build vessels full time in Asia.

Norwegian Cruise Line is also likely to base a new-build Breakaway-Plus vessel in China, according to reports.

The state of Carnival is strong
Overall, Carnival Corp. seems to have rebounded from the doldrums of 2012 and 2013. The company’s net income in the first quarter of 2015 more than doubled compared to last year.

While a strong dollar reduced the company’s overall profit, increases in onboard spending and the booking cycle bode well for continued growth.

Bookings are occurring further out than in previous years, a sign of increased demand for Carnival brands, according to Donald.

That could lead the company to finally increase pricing, a long-time concern for agents who sell Carnival brands. Commissions increased slightly in the first quarter of 2015, year-over-year.

“Our travel partners are helping to drive revenue and are benefitting from our improved performance,” said Donald.