Bookings fall after Concordia shipwreck

Business

February 1, 2012

THE ASSOCIATED PRESS Associated Press Wed Feb 01, 2012, 07:27 AM EST

NEW YORK — The frightful images of a sinking Italian cruise ship have scared off some cruise passengers, at least temporarily, during the industry's peak booking season.

Travel agents — who book more than two-thirds of cruise passengers worldwide — have been nervously watching bookings ever since the Costa Concordia, which is owned by Carnival Corp., ran aground on Jan. 13.

On Monday, they got a new reason to be nervous: Bookings fell significantly for Miami-based Carnival Corp. following the Costa accident. Attention is now focused on Royal Caribbean Cruises Ltd., which reports earnings on Thursday. An increase there could show that passengers are fleeing Carnival over safety fears. A decrease could indicate an overall distrust of all cruise lines.

Nearly 11 million Americans took a cruise last year, generating an estimated $14.5 billion in revenue for the industry, according to PhoCusWright, a travel research firm. Like the rest of the travel industry, cruise lines are still recovering from the Great Recession. Several new mega-ships started sailing just as passengers struggling with their finances decided to stay home. But 2012 was supposed to be a year of moderate growth.

Carnival won't say exactly how much bookings have dropped, but it disclosed Monday that in the 12 days following the Concordia capsizing there was a percent decline "in the mid-teens compared to the prior year." Reservations hit a low on Jan. 16, the company said in its annual report filed with the Securities and Exchange Commission.

Carnival operates 101 ships under several brands including Costa, Carnival, Cunard, Holland America, Princess and Seabourn. It said reservations with the Costa line are "down significantly" but difficult to interpret because many Costa customers were rebooked on other ships because of the loss of the Concordia ship.

"Despite these recent trends, we believe the incident will not have a significant long-term impact on our business," the company said.

Carnival's statement is the first evidence that passengers are hesitant to embark on cruises after seeing the awful images of the Concordia shipwrecked off the Italian coast. More than 4,200 passengers and crew were on board the ship at the time of the accident. Seventeen bodies have been recovered, one of which has not yet been identified. Sixteen people are missing.

Europeans, who have been bombarded with daily reports of the accident, have been particularly skittish. They accounted for about 38 percent of Carnival's revenues last year.

Jaime Katz, an analyst at Morningstar, noted that there were big discounts on some seven-day cruises out of Rome while other trips had raised prices.

Discounts depend on which company is operating the ship and where it is traveling. Katz added that first time cruisers might also be more hesitant to book.

Unlike plane tickets or hotel rooms which are mostly booked directly through the internet, most cruises are sold by travel agents. Passengers like speaking with somebody who can assist them with all the decisions and quirks involving each ship and itinerary. That scattered sales approach makes it harder to gauge the impact of an accident like the Concordia.

"Who knows how many people ... (were) on the fence and decided not to book?" said Michael Driscoll, editor of Cruise Week.

Barclay's Capital noted that on Thursday, the Carnival line began offering promotional onboard credits of up to $200 for things like drinks and spa treatments.

"Despite this ad, which in normal circumstances would have stimulated strong call volume, calls remain down 10 (percent)," Barclay's analyst Felicia R. Hendrix wrote in a note to investors.

A major unnamed online travel agent has also seen cruise call volume fall 30 percent, Hendrix said.

Hendrix also noted that cancelations in the U.S. are up 10 to 15 percent. That's because savvy travelers are backing out of trips now in anticipation of getting the same cruise later for less.

In the week following the shipwreck, booking site CruiseCompete saw 4 percent fewer people requesting price quotes for a cruise than the same week last year. This past week saw requests down 3 percent. Right before the accident, inquiries were up 9 percent.

However, not everybody is seeing a drop in bookings.

Travel Leaders, a network of independently owned and operated travel agencies in the U.S. surveyed its members about demand for cruises this year. Spokeswoman Kathy Gerhardt said there has been no noticeable difference in responses gathered before and after the accident. And, Cruise Holidays, a network of 200 U.S. and Canadian travel agents specializing in cruises saw a 1.4 percent increase in sales last week compared with the same week in 2011.

And prices generally aren't falling.

Sharon Zackfia, an analyst with William Blair & Co., said the stable prices might indicate that "cruise companies are waiting to assess the situation in full before" offering deals.

"It's still way too soon after the Costa shipwreck," she said, "to know what the implications are going to for the cruise industry."