Who will still cruise with Princess...I think many in these groups won’t

[V_icki_e]

Can't wait to cruise with Princess again - February 2021 can't come soon enough.   My biggest trepidation is disembarking in Sydney, especially after the shellacking the NSW Department of Health got in today's Ruby Princess enquiry finding.   

[JimmyVWine]

14 hours ago, Hlitner said:

But the big issue will be social distancing.  While this might work on small luxury cruise ships it does not fit the design of most mass market vessels.

 

100% right.  The mass market cruise industry built a business model over the past 10 years with its mega-ships that is antithetical to any attempts to socially distance.  Take dining.  Assume a very different buffet situation that is not to everyone's liking.  That moves more people into the MDRs.  Right now, packed like sardines, MDRs need a block of time from 5:00-9:30 (or later) to accommodate everyone.  If you can only fill a dining room half way, and you cannot combine groups of "strangers" into tables of 8, you would need to triple the time needed to serve dinner.  First seating at 3:00.  Last seating at 10:30. At best.  You would need 5 shows an evening in the theater to even begin to handle the crowd.  You would have to take away 60% of the deck chairs in order to space them out properly.  It simply cannot be done.  No Champagne fountain reception.  No Captain's Circle receptions.  Bingo, trivia and game shows with only 1/3rd to 1/2 the current attendee load.  Honestly, there isn't a single thing outside of your cabin that you currently do on a cruise that could be done under effective distancing guidelines.  As hard as it is for schools, restaurants, salons and retail stores to figure out work-arounds, the mega-ship cruise industry has problems that are 100 times more unsolvable.      

[voljeep]

10 minutes ago, JimmyVWine said:

100% right. 

it will be a year or so before ships even attempt to sail at full capacity ... that will take care of a lot of the above

[Hlitner]

I just would add my disbelief to  the idea that RCI or any line can even break even with 50% occupancy.  It is a complete crock (using a polite term) and stretches the credibility of any cruise executive that make such a statement.  So lets talk about RCI (since they have made the statement) and their mega ships.  The RCI business model is based on "maximizing onboard revenue."  The financial model relies on the basic cruise fare to cover capital costs (we are talking billion dollar ships) and operating expenses.  Onboard revenue is where the real profits are generated.  When you talk about cutting the number of passengers in half there are a lot of dynamics that come into play.  Even reducing passengers does not mean you can make any meaningful reductions in crew.  Ships have a minimum staffing requirement (for safety) and even with half the number of passengers you still need to staff most venues such as bars, casino, dining venues, etc.  The Marine Department (which operates and maintains the vessel) has the same staffing requirements regardless of the number of passengers so there is no savings in this Department.  There can be some staffing reductions in housekeeping/hotel Department but nowhere near the percentage cut-backs in passengers.  And keep in mind that much of cost of the housekeeping/dining staff is borne by passengers via the tipping scheme.  Cut the passengers in half and the tipping pool will also be cut in half.  You also have other expenses that do not get reduced when you cut passengers.  The cost of fuel, much of the port fees, etc. an

 

Also consider the entertainment department.  Their costs are based on the number and type of entertainment venues.  The cost of putting on a Production Show is the same whether you have 2000 passengers or 4000 passengers.  Cut the number of passengers in half and you either must cut-back on entertainment or budget a lot more per passenger day.  

 

And now we add a huge new expense which is the cost of new debt obligations taken on by RCI (and other lines).  This adds another new chunk or expense per passenger day and reducing the number of passengers by half means the cost per passenger doubles.  Meanwhile, the onboard revenue (a big part of the business plan) will fall in proportion of the number of passengers.  Cut the passengers in half and onboard revenue will likely fall by half.  So to sum up, the claims that a ship can operate profitably at 50% occupancy sounds like a "stretch" if not an out right misleading lie.

 

Hank

[Hlitner]

18 minutes ago, voljeep said:

it will be a year or so before ships even attempt to sail at full capacity ... that will take care of a lot of the above

That will help in some areas but have minimum impact in others.  Consider the main theater on most ships.  The seats are theater-type fixed and close together.  You would probably need to cut out nearly half of capacity in order to allow adequate social distancing.  And then you have all the bars/lounges where maintaining social distancing in nearly impossible (this has been an unfortunate finding in areas that have tried to reopen bars/clubs.   Most ships also have multiple "choke points" where folks tend to be crowded together.  And then there is the elevator issue which is a problem on nearly all ships.  Even reducing passenger capacity, although helpful, will not solve this constant bottleneck.   But I guess we shall have to wait and see how it works.  But the experience with Hurtigruten does give one a reason for skepticism.

 

Hank

[memoak]

Vaccines are the only answer

[latserrof]

 

19 minutes ago, Hlitner said:

I just would add my disbelief to  the idea that RCI or any line can even break even with 50% occupancy.  It is a complete crock (using a polite term) and stretches the credibility of any cruise executive that make such a statement ...

 

A "stretch" if not an out right misleading lie.

 

 

Totally agree.

 

And one other new cost you did not mention is the added expense of all the new covid screening/monitoring/preventing/reacting that will be necessary if they ever sail again.

Edited August 14, 2020 by latserrof

[npcl]

37 minutes ago, Hlitner said:

I just would add my disbelief to  the idea that RCI or any line can even break even with 50% occupancy.  It is a complete crock (using a polite term) and stretches the credibility of any cruise executive that make such a statement.  So lets talk about RCI (since they have made the statement) and their mega ships.  The RCI business model is based on "maximizing onboard revenue."  The financial model relies on the basic cruise fare to cover capital costs (we are talking billion dollar ships) and operating expenses.  Onboard revenue is where the real profits are generated.  When you talk about cutting the number of passengers in half there are a lot of dynamics that come into play.  Even reducing passengers does not mean you can make any meaningful reductions in crew.  Ships have a minimum staffing requirement (for safety) and even with half the number of passengers you still need to staff most venues such as bars, casino, dining venues, etc.  The Marine Department (which operates and maintains the vessel) has the same staffing requirements regardless of the number of passengers so there is no savings in this Department.  There can be some staffing reductions in housekeeping/hotel Department but nowhere near the percentage cut-backs in passengers.  And keep in mind that much of cost of the housekeeping/dining staff is borne by passengers via the tipping scheme.  Cut the passengers in half and the tipping pool will also be cut in half.  You also have other expenses that do not get reduced when you cut passengers.  The cost of fuel, much of the port fees, etc. an

 

Also consider the entertainment department.  Their costs are based on the number and type of entertainment venues.  The cost of putting on a Production Show is the same whether you have 2000 passengers or 4000 passengers.  Cut the number of passengers in half and you either must cut-back on entertainment or budget a lot more per passenger day.  

 

And now we add a huge new expense which is the cost of new debt obligations taken on by RCI (and other lines).  This adds another new chunk or expense per passenger day and reducing the number of passengers by half means the cost per passenger doubles.  Meanwhile, the onboard revenue (a big part of the business plan) will fall in proportion of the number of passengers.  Cut the passengers in half and onboard revenue will likely fall by half.  So to sum up, the claims that a ship can operate profitably at 50% occupancy sounds like a "stretch" if not an out right misleading lie.

 

Hank

I think it comes down to how you define break even. If you limit it only to the ships operation, and not include any corporate expense lines (debt, marketing, G&A, transportation, depreciation, maintenance, etc) and limit only to crew salary, fuel, food then maybe a cruise might be able to break even, barely.

Edited August 14, 2020 by npcl

[JimmyVWine]

NCL (Del Rio)and RC (Fain) CEOs in interview with Financial Times in July:

 

“One of the hallmarks of the cruise industry is that we always sail with full ships. It’s one of the basic tenets of our business model,” cruise executive Del Rio told the Financial Times. Lower capacities “would be a severe blow” to financial performance, he added. CEO Fain said that it is a “simplistic approach” to “assume that you simply take what happens on land and apply it on to the sea.”

 

And granted, it was 11 years ago, but CNBC ran a show called "Cruise Inc.-Big Money" that showed a "week in the life" of an NCL ship.  The moral of the story was then (and I believe it is still true now) that the break even point of a cruise is when every single cabin is occupied.  100% of the profit for a particular sailing comes from on-board spending and the casino.  https://www.cnbc.com/cruise-inc/   

[latserrof]

21 minutes ago, JimmyVWine said:

 100% of the profit for a particular sailing comes from on-board spending and the casino.  https://www.cnbc.com/cruise-inc/   

FWIW, I happened to have been seated next to one of Princess's top financial guys at dinner during the press launch of the Diamond Princess back in 2004 and he told me that a ship's biggest money-maker was not the casino, the bars, or the shops, as I had successively guessed, but the "art" auctions.

[JimmyVWine]

2 hours ago, voljeep said:

it will be a year or so before ships even attempt to sail at full capacity ... that will take care of a lot of the above

 

If the implication here is that ships will sail at less than full capacity for a while and then eventually return to full capacity, I am in the "disbelief" camp.  Consider the following.

• In order to set sail, the ship has to have ports it can dock in.  Imagine being the Health Director of a small Caribbean island and you are told that 5 ships from Florida want to call on your island on Tuesday.  The passengers are mostly from the U.S..  Only 15 out of 50 states currently meet CDC guidelines for reopening, yet these 7,000 passengers, (would have been 15,000 were the ships full), come from 43 of the 50 states.  Your hospitals barely have enough beds to accommodate the island's residents under normal conditions.  Now you have to decide whether to allow the ships to disembark passengers.
• So perhaps the solution is to reduce not only the passenger load, but the port load as well.  One ship at a time per island.  There aren't enough ports to accommodate all the ships.  So perhaps in turn, the cruise lines will operate fewer ships.  But even still, will the cruise lines that normally sail 7-10 ships in the Caribbean at any one time make a go of it by sailing only 2 or 3 at half capacity?  Can that ever be profitable?
• And perhaps more importantly, the cruise industry has only one chance to get this right.  School districts that have tried to reintroduce in-person learning (with new precautions in place) are suffering setbacks.  Every state that tried to jump into a return to normal (with new precautions in place) has suffered a setback.  Every area that has reopened bars and restaurants, (the sine qua non of cruising), has suffered setbacks even with new precautions in place.  The cruise ship from Norway that tried to make a go of it (with new precautions in place) suffered a setback.  There is every reason to think that we are now, and will be for the foreseeable future, in a situation where any attempt to congregate large numbers of people, even with new precautions in place, will result in new outbreaks.  And if one more outbreak can be tied to a mass market U.S. based (not flagged) cruise line such as Princess, Norwegian, Royal, Disney, Carnival, etc., then it is over.  No more second chances.  There will be mass bankruptcies and a complete restructuring of the industry and whatever ships survive, owned by whomever, won't sail for 4-5 years. 

"I think we can pull this off" is never going to be the successful rallying cry of any cruise line.  It has to be: "I am certain that we have this right."   I don't think that half-capacity ships with Plexiglas partitions is going to win over board members or local health authorities.  Ships won't sail at limited capacity unless the CEOs and Boards are 100% certain that their ships won't be featured on the front page of the New York Times.      

[JimmyVWine]

1 minute ago, latserrof said:

but the "art" auctions.

 

Wow!!  That was mentioned in the CNBC show, but it was not identified as being the top revenue source.  Never would have thought that the cruise industry stands on the round, green shoulders of Martini olives sliding across piano keys!  

[latserrof]

26 minutes ago, JimmyVWine said:

 

Never would have thought that the cruise industry stands on the round, green shoulders of Martini olives sliding across piano keys!  

I've always been outbid on those.

[chipmaster]

Would I sale the Princess I remembered from my first cruise, yes, would I do it at double the price and half the crowd, yes.  I'm richer and in another place.

 

I actually would jump at that, but I'm luckier to be where I am in life and wealth.   

 

For Carnival and RCCL and others that have heavy debts financing a much larger volume and market, that will be an interesting consolidation if for the next three years things are restrictive.   

 

Like the Hotel, and Airline and Movie industry NOBODY can predict where this will end.  No question the possible outcomes are vary extreme given the failures of almost all countries to do what they could have if they had known what they did now.  

[npcl]

2 hours ago, JimmyVWine said:

NCL (Del Rio)and RC (Fain) CEOs in interview with Financial Times in July:

 

“One of the hallmarks of the cruise industry is that we always sail with full ships. It’s one of the basic tenets of our business model,” cruise executive Del Rio told the Financial Times. Lower capacities “would be a severe blow” to financial performance, he added. CEO Fain said that it is a “simplistic approach” to “assume that you simply take what happens on land and apply it on to the sea.”

 

And granted, it was 11 years ago, but CNBC ran a show called "Cruise Inc.-Big Money" that showed a "week in the life" of an NCL ship.  The moral of the story was then (and I believe it is still true now) that the break even point of a cruise is when every single cabin is occupied.  100% of the profit for a particular sailing comes from on-board spending and the casino.  https://www.cnbc.com/cruise-inc/   

Again it depends upon how you define it, With the NCL ship they were using fully loaded costs which included allocated corporate expenses.  In such a case they would end up with somewhere between 6 to 15% profit with capacity over 100% and including all on board spending.  Basically the same as the corporations over all profit calculation. Not unusual when doing accounting with a profit center where you allocate the expense/support  centers across the revenue producing centers.

 

On the other hand if one wanted to claim where a cruise itself would be profitable and removed all of the costs associated with other corporate operations you could look at only the expenses needed to run the ship (food, fuel, crew) and calculate against that.  Since the cruise ships generate almost all of the revenue for the corporation they would have to go cash positive low enough to be able to fund all of the other activities of the corporation, including debt and new ship construction costs.

 

Basically both the RCL comment and the NCL model in the show are true it just depend how the numbers are structured and context.

 

It would not be break even for the corporation by any measure, but it could mean that as much money was generated as it cost the company to actually run the ship for number of days for that cruise.

Edited August 14, 2020 by npcl

[latserrof]

1 hour ago, npcl said:

A

1 hour ago, npcl said:

It would not be break even for the corporation by any measure, but it could mean that as much money was generated as it cost the company to actually run the ship for number of days for that cruise.

 

But they'll make it up on volume.

Edited August 14, 2020 by latserrof

[suzyed]

On 8/11/2020 at 7:01 AM, Esprit said:

Well, we will happily cruise with Princess again, hopefully next summer.

We would have been on Enchanted Princess now. Instead I’m in Madrid in the middle of a massive thunderstorm 😩

Are all the Enchanted cruises cancelled? I spoke with someone who is still booked on an Enchanted Princess cruise (I believe in 2021)and has not been notified of a change.

Edited August 14, 2020 by suzyed

[suzyed]

On 8/11/2020 at 9:10 AM, resistk said:

There was a reason why Princess was hit hardest by COVID of any cruise line.  I don't trust them to keep my family safe. 

What was the reason?

 

[PrincessLuver]

59 minutes ago, suzyed said:

What was the reason?

 

 

There was not one reason......there were many many reasons and you can read a ton of articles about their incompetence if you want to:

https://www.wired.com/story/diamond-princess-coronavirus-covid-19-tokyo-bay/

[Ombud]

3 hours ago, npcl said:

It would not be break even for the corporation by any measure, but it could mean that as much money was generated as it cost the company to actually run the ship for number of days for that cruise.

So how is that not breaking even? I'm not trying to be argumentative just trying to understand 

[JimmyVWine]

13 minutes ago, Ombud said:

So how is that not breaking even? I'm not trying to be argumentative just trying to understand 

“Break even” for the ship means that the operating costs for that ship, on that particular cruise (fuel, crew salary and benefits, food costs, etc.) equals the revenue  generated for that specific cruise (fares plus on board spending). So the ship costs equals the ship revenue. But the corporation has other expenses that need to be accounted for. (Real estate rent/mortgage, salary and benefits of land-based employees and executives, debt carried for things like ship building, advertising costs etc.). If the ship breaks even in terms of operating costs, there is no money left over to pay the non-ship overhead so the net result is a corporate loss. 

[npcl]

3 hours ago, latserrof said:

But they'll make it up on volume.

Think of it more that they will cut their burn rate a little by getting some ships to break even for a number of days.  Will not save them, but might buy them some more time and have them in a better position when they can start up full speed by having crew on the ship and it ready to go.

[npcl]

2 hours ago, PrincessLuver said:

 

There was not one reason......there were many many reasons and you can read a ton of articles about their incompetence if you want to:

https://www.wired.com/story/diamond-princess-coronavirus-covid-19-tokyo-bay/

You can also read the CDC documents and see that the other lines  were keeping them company in demonstrating a lack of competence  Even after they all should have known better after the passengers left.

[resistk]

5 minutes ago, npcl said:

You can also read the CDC documents and see that the other lines  were keeping them company in demonstrating a lack of competence  Even after they all should have known better after the passengers left.

 

Total disregard of safety of passengers and crew seems to be the main factor.  The lines are betting people forget though ongoing lawsuits will keep the memory fresh.

[Ombud]

34 minutes ago, resistk said:

Total disregard of safety of passengers and crew seems to be the main factor.  The lines are betting people forget though ongoing lawsuits will keep the memory fresh.

What lawsuits?