Prospects for the cruise sector are better than expected with little sign holidaymakers will give up their holiday this year.
Carnival UK chief executive David Dingle, speaking at an e-tid breakfast briefing this week, admitted 2009 would be challenging and that 2010 was unlikely to be much different.
But he insisted prospects for the sector this year and longer term remained strong.
He added: “The prospects for cruising do not look too bleak. It does seem to be the case that there are fewer signs of people being prepared to forgo their main holiday than we would have expected.”
Sterling-based cruises and the inclusive nature of cruises also played into the hands of holidaymakers looking to avoid paying out large sums of euros this summer due to the unfavourable exchange rate.
He said Carnival UK was reaping the benefits of lower fuel prices as well as being aided by a lack of capacity growth this year. “We have the benefit of lower fuel prices rolled into our forecast, but we are allowing for yield erosion of between 6% and 10%.”
In 2008 the company achieved a net profit of $2.3 billion and for 2009 Carnival Corporation Plc’s mid-point earnings per share forecast is $2.50 per share, equating to a $2 billion profit. “That’s in [what is assumed to be] a tough year,” said Dingle.
The company could sustain a drop in the UK’s current annual growth rate of 12% to zero.
He added: “We are fortunate in economies of scale and and that fuel costs have come down. We have the ability to reduce prices and still be highly profitable.”
For the industry in general, Dingle predicted the two industry giants TUI Travel and Thomas Cook would be best positioned to weather the economic storm. He warned: “If you are a generalist and you are trying to gather in business on very low margins you must be very uncomfortable at the moment.”