Carnival Execs Confident that Costa Brand Will Bounce Back
By Theresa Norton Masek
March 09, 2012 11:31 AM
Costa Cruises will lose about $100 million this year, a swing of about $500 million from last year, due to fallout from the Jan. 13 Costa Concordia capsizing, Carnival Corp. executives said during a conference call discussing first-quarter 2012 results. The call opened with a statement by Carnival Chairman and CEO Micky Arison, expressing his sympathy to victims and survivors and gratitude to Italian authorities and crew members who helped 4,000 people evacuate the Concordia. “As you can imagine, this been a most difficult, challenging time for our corporation,” he said.
Still, the company is already seeing signs of improvement, especially among the North American brands. In the first four weeks after the Concordia grounding, Costa bookings plunged 80 to 90 percent. In the last three weeks, however, they were 40 to 50 percent lower, signaling some improvement even during a time with no Costa marketing or advertising.
Arison and COO Howard Frank both expressed confidence that the Costa brand will bounce back. “I think people, even in Italy, are seeing this as a one-time freak event … a very unfortunate incident,” Frank said. “It will take a year or two to come back, but it will come back.”
Arison said extensive surveys conducted among Italian consumers indicate they “continue to view Costa as great vacation option. … There’s no question Costa will come back and come back stronger than ever.”
The executives said cruise fares are not being dropped to encourage bookings, even at the expense of lower occupancy levels.
Costa’s fleet is currently down by three ships, with the Costa Concordia declared a total loss. On Feb. 27, an engine room fire left the Costa Allegra adrift for three days near the Seychelles; the status of repairs remains uncertain. And, the Costa Marina left the fleet late last year. Arison said the 1969-built Costa Allegra had been for sale and would’ve been removed from the fleet once a buyer was found.
The executives noted that the Carnival Cruise Lines brand is performing especially well, despite conventional wisdom that the Concordia tragedy would scare off first-timers. As a contemporary brand, Carnival tends to attract more first-timers. “In reality, it suffered the least impact,” Arison said. “In fact, Carnival’s business is up year-over-year. It’s our best performing brand right now on a year-over-year basis.”
Some of the premium brands are struggling a little more with their European cruises, which could be due to economic troubles on the continent and high air fares, as well as Concordia fall-out.
But a number of consumer surveys indicate safety is not the number-one reason people are holding back from booking a cruise, Arison said. “Clearly there is recognition that this is a very, very safe industry,” he said. “The top reason is the expectation that prices are getting lower. At this point, there is no reason to believe that to be the case, and as people realize that, they’ll come off the fence and book cruise vacations.”