In its quarterly business update, released yesterday, June 24, Carnival Corporation’s outgoing CEO Arnold Donald mentioned the company was aiming for 110% occupancy levels for at least one cruise line, Carnival Cruise Line.
With the busy summer months coming up, the cruise industry expects to welcome more and more families onboard, who typically sleep together in a cabin. A complete, 100% occupied ship means all cabins have at least two people. Going over that would mean 3- or even four people per cabin.
Carnival Cruise Line To Stretch Occupancy Levels Above 100%
Outgoing Carnival Corporation CEO Arnold Donald, who will be stepping down as CEO on August 1, announced in the company’s quarterly business update it aims for 110% occupancy levels onboard Carnival Cruise Line’s ships this summer.
Arnold Donald: “We are aggressively, yet thoughtfully, ramping up to full operations with over 90 percent of the fleet now in service. We are driving occupancy higher, while at the same time significantly increasing available capacity.”
“Carnival Cruise Line, our largest brand, achieved consistently positive adjusted EBITDA beginning in March. Carnival Cruise Line also became our first brand to sail its entire fleet in May and is expecting occupancy to approach 110 percent during our third quarter.”
While it certainly would be great for business, many would question whether the timing for stretching occupancy levels above 100% is too early. Then again, with the popularity Carnival Cruise Line is experiencing and a recently slumping share price, Carnival Corp. needs to take action somewhere.
And indeed, the news brought smiles to Carnival Corporation’s investors; the share price went up significantly on Friday and is currently trading at $2 above the $8.84 the stock was trading at on June 17.
Whether the timing of this news is correct remains to be seen. In recent months several cruise lines, including Carnival Cruise Line and most other cruise lines in the company’s portfolio, have struggled with crew shortages.
Couple that with the continued presence of COVID-19 onboard cruise ships, pushing occupancy levels to the highest possible seems risky.
Is Carnival Corporation’s Strategy Considering Crew Shortages?
According to Carnival Corporation, the company has been making progress on the crew shortages onboard its ships. Those shortages have already burdened the crew members onboard, who in many cases have seen their vacations cut short and contracts extended.
Those shortages have also resulted in many cruises being adjusted or placed under occupancy constraints. Christine Duffy, the President of Carnival Cruise Line, reported earlier this month that Carnival had closed agreements with the U.S. State Department and the US Customs and Border Protection to ease the entry and visa requirements for joining crew members:
Christine Duffy, President of Carnival Cruise Line: “We’ve actually made great progress recently with the U.S. State Department, which is providing support for us to get visas renewed. And we’ve been very grateful to CBP [the US Customs and Border Protection] which has allowed us to even bring some crewmembers in that may have an expired visa, so that at least they can work and we can continue to operate.”
COVID Remains a Problem
So while this may have helped reduce the problems with crewing the ships, the other big problem remains COVID-19. In recent weeks there has been an increase throughout the cruise industry in reported cases.
But, that being said, those come at the same time as the industry is evolving and learning how to better deal with the virus while having less impact on guests. Some cruise lines, such as Carnival Corporation’s P&O Cruises, are already experimenting with removing the onboard testing protocols.
It could be that Carnival Corporation is making steps in the right direction, at least for its bottom line. Currently, Carnival cruise ships have seen occupancy levels of 69%, an increase from 54% in the prior quarter. A jump to 110% would mean a significant increase.
Whether crew shortages and COVID-19 will be interfering with those plans is something that will become evident in the coming weeks and months.