Cruise Line Onboard Revenues Off the Charts

[Computer Nerd]

9 hours ago, Pjnc said:

Hi

 

Revenue might be off the charts but they are denying stockholder credit.  Leaves a bad taste in my mouth.  Possibly my last Carnival cruise coming up in eleven days.

 

pat

murrells inlet, sc

I got my shareholder OBC on my Freedom cruise last month.

[firefly333]

5 hours ago, Illbcruzn4life said:

pent up demand? everybody is just usin all their OBC.

I ran into more than one person who bought gift certificates with their obc to use on another cruise.

 

Are gift certificates counted toward spending when they say spending is up. Of course it's up. Never saw so much obc thrown at cruisers. My friend got more obc than he paid for his cruise and his sister mentioned no worries if extra obc, she would cash it out in the casino the last sea day.

 

I think I predicted lots of spending because of all the obc. Free money. 

[Linda the Book Lover]

12 hours ago, Pjnc said:

Hi

 

Revenue might be off the charts but they are denying stockholder credit.  Leaves a bad taste in my mouth.  Possibly my last Carnival cruise coming up in eleven days.

 

pat

murrells inlet, sc

I also had no issue ever receiving my shareholder $$. Already set for the next cruise in December.

[skridge]

16 hours ago, Saint Greg said:

I wonder if that is before or after everyone spends their $600 OBC.

I was wondering the same thing.  They have probably given away a hundred million in OBC in the past 2 years.  Does that count as revenue?  If so this article is misleading and another example of the cruise industries fraudulence during the pandemic.

[KmomChicago]

We spent a bit more onboard MG in August than normal, and we were sailing on a paid cruise, that we had booked November 2020 for whatever rates were on the Carnival website, just regular VIFP deals. 

 

Definitely pent up demand but more than that, after the relentless careful avoidance of Covid for more than a year, just the pure joy of living life like we used to, and being reminded in big bold letters that it's all fleeting (see what I did there) for all of us, all the time, every day.  Make hay while the sun shines.  We may never pass this way again.  We don't live each day as if it's our last, but at this point I am ready to enjoy each vacation as if it could be the last. With the exception of Carnival Magic many many years ago on two shorty 3-nighters, each cruise vacation has been the last on that ship. 

 

No casino fire sale for us. We paid our fare like the Ruby Plus chumps we are. (No that is not a thing but it's what I like to call my red card).

 

We had only something like $50 or $100 OBC that came with the booked rate - no cancelled cruise $$ because I presciently booked only that one cruise during the pandemic, figuring it was the last week before our teen's school resumed for fall, and to me, around the first feasible time frame that cruises might actually be sailing.  Remember at that time no vaccines were approved but the buzz on the trials was looking positive. 

 

Many times over the ensuing winter and spring I assumed we'd be cancelled like everything else. I was prepared, sadly, for that possibility. It was tremendous luck and timing that Mardi Gras got on the water by summertime and we were on the 2nd sailing. THE SECOND SAILING of the CARNIVAL MARDI GRAS. 

 

We got bottomless bubbles to try to avoid dehydration in the Mexican heat, ate in the steak house one night and Bonsai Sushi another, purchased an adult beverage here and there, bought a handful of photos from Pixels, got some ship inaugural season clothing and a ride on Bolt.  There was more, but who remembers? We nickeled and dimed ourselves to some extent and I really didn't care. 

 

Likewise on our upcoming Carnival Legend voyage we have already bought splurgy stuff we've never done before, such as a cabana at HMC, even though we are only scheduled to be there a lousy 5 hours.  My mom is 78 and will be hobbling along with us, my teen is a sophomore and time is running out for both of them to vacation with me. A beach day in the tropics while Illinois is back here plunged into the depths of solstice darkness is worth it. 

 

I used to go for quantity of travel and economize. While that's still a concern, the quality ratio is changing at this point and if that means they separate me from a few more of my hard earned $$, so be it.

[firefly333]

52 minutes ago, Linda the Book Lover said:

I also had no issue ever receiving my shareholder $$. Already set for the next cruise in December.

The only people who had trouble getting shareholders credit were the almost free cruises. Or free casino offers with obc. The $20 cabins vipf offers.

 

Regular offers havent had any issues. 

 

No worries. 

[Spif Barwunkel]

Kinda like post #30 but a shorter version, quality for my dollars is what matters. If I spend twice as much as the next cruiser for the exact same offerings, that's cool because it works for me. I am happy that cruise line onboard revenues are off the charts. All the extraneous analytics as to why this is happening are of no interest to me. Just glad I am able to contribute my fair share for the benefit of cruising's return to profitability.

 

Thanks to those folks whose inquisitive tidings do make for fascinating reading.

 

 

 

 

[Bevv]

1 hour ago, skridge said:

I was wondering the same thing.  They have probably given away a hundred million in OBC in the past 2 years.  Does that count as revenue?  If so this article is misleading and another example of the cruise industries fraudulence during the pandemic.

From what I recall from bookkeeping class... (MANY years ago) When the bonus Future Cruise Credits or OBCs were generated, they becomes a part of the expenses for the quarter that it is generated since it is an obligation on the cruiseline's part. So the $$$$$$$ that were given out during that time period added to that quarter's loss since it created a debit in bookkeeping. When the OBC or bonus FCC is redeemed, it is now revenue on the cruiseline's part and is a credit to the books. 

 

Edited November 10, 2021 by Bevv

[Can'tWait2SetSail]

7 hours ago, bigrednole said:

Its not about that. It is about making a statement that onboard spending has skyrocketed. You need to define how that is the case. 3,000 pax per sailing, everything up $1, assume everyone buys 10 things, that's $30,000 in extra revenue. Multiply that by 100 sailings in a quarter, that is $3M more in spending. I am sure it is at least 10x larger than that, but it paints the picture.

That is A LOT of popcorn.

[khewston]

We got a great deal on our upcoming cruise on the Mardi Gras.  I have wondered if this is due in part to how much we have spent onboard on past cruises.

[BlerkOne]

4 hours ago, skridge said:

I was wondering the same thing.  They have probably given away a hundred million in OBC in the past 2 years.  Does that count as revenue?  If so this article is misleading and another example of the cruise industries fraudulence during the pandemic.

They haven't given away anything. It's all monopoly money. Much of it will expire before being used. However if you read the article, onboard spend for other cruiselines is also through the roof.

[Denverdonkeys]

4 hours ago, Bevv said:

From what I recall from bookkeeping class... (MANY years ago) When the bonus Future Cruise Credits or OBCs were generated, they becomes a part of the expenses for the quarter that it is generated since it is an obligation on the cruiseline's part. So the $$$$$$$ that were given out during that time period added to that quarter's loss since it created a debit in bookkeeping. When the OBC or bonus FCC is redeemed, it is now revenue on the cruiseline's part and is a credit to the books. 

 

As a current auditor, I would think they would present a case to their auditor to account for the OBC when it is redeemed. If a passenger does not take another cruise, they receive nothing, so the obligation is not until they are on the ship. They also probably classify it as contra revenue. That would be semantics to the bottom line.

 

On the FCC's, they should recognize a liability for those at the time of issuance, until they expire.

 

[txgal08]

20 hours ago, BlerkOne said:

They are also almost giving away many cabins, drink packages, etc.

 

I've been on 3 cruises this year and have yet to buy popcorn. I have gotten free drinks (above the normal free drinks) on two of the three cruises. The steakhouse was the normal price. I can't think of anything else that now has a charge that didn't before.

Exactly - my last cruise was $84 as a solo cruiser.  I spent my money on the ship!

[MrMarc]

It is amazing.  No matter who says what about anything, people will jump in with reasons it's not true.

[Rudyard]

On 11/9/2021 at 2:39 PM, Saint Greg said:

I wonder if that is before or after everyone spends their $600 OBC.

 

I was wondering the same thing. We don't drink very much so we actually struggled to find stuff to spend $600 on on our recent 5 day cruise. Did all the specialty restaurants, played a lot of bingo, bought a bunch of stuff in the Fun Shops, even paid our gratuities using OBC and on the last evening blew about $50 buying stuff in Cherry on Top to give away to friends and family.  

[skridge]

19 hours ago, BlerkOne said:

They haven't given away anything. It's all monopoly money. Much of it will expire before being used. However if you read the article, onboard spend for other cruiselines is also through the roof.

I disagree.  I believe a very high percentage of it will be used simply because it was given to people with a huge thirst to cruise and these people are going to use it.  Your comment does not answer my question of is OBC counted as revenue.  If it is that is grossly misleading.  

[BlerkOne]

4 hours ago, skridge said:

I disagree.  I believe a very high percentage of it will be used simply because it was given to people with a huge thirst to cruise and these people are going to use it.  Your comment does not answer my question of is OBC counted as revenue.  If it is that is grossly misleading.  

How is it misleading? Revenue is just that. Perhaps you are confusing revenue with income?

 

 

[keels81]

My last three cruises post-restart (and ESPECIALLY on the Mardi Gras), the Blue Cards outnumbered all other colors at the specialty restaurants and bars.

 

I did a lot of content about my Girls Trip cruise on the MG and you wouldn't believe how many non-cruiser friends have asked me about our experience, price and have expressed interest in trying a cruise now that these ships are like floating AIs.

 

The increase in onboard spend doesn't surprise me one bit -- FCC and OBC is basically free money on the balance sheet for this quarter when it was already written off as a loss for the quarter back when it was issued.

 

Also, whether its OBC or not, higher onboard spend means more money for our crew member friends working in specialty restaurants, bars, Pixels, etc., because people are buying more packages with included grats than possibly before.

[Buckeyefrank100]

On 11/10/2021 at 7:56 AM, skridge said:

I was wondering the same thing.  They have probably given away a hundred million in OBC in the past 2 years.  Does that count as revenue?  If so this article is misleading and another example of the cruise industries fraudulence during the pandemic.

The money they gave away as OBC doesn't count as revenue to Carnival.  When it's used onboard it is turned into that revenue.  So if they buy a drink package with OBC, CCL records revenue for that drink package and reduce the liability for OBC.  The accounting is no different than when they sell a GC.  At the sale, they record the receipt of the cash and the liability until the GC is redeemed and turned into revenue.  The OBC for covid was recorded as a liability and an expense (technically prepaid expense) to CCL when it was issued.  Upon use, it converts to revenue.  Nothing fraudulent at all.  It's accounting 101.

[Buckeyefrank100]

20 hours ago, Rudyard said:

 

I was wondering the same thing. We don't drink very much so we actually struggled to find stuff to spend $600 on on our recent 5 day cruise. Did all the specialty restaurants, played a lot of bingo, bought a bunch of stuff in the Fun Shops, even paid our gratuities using OBC and on the last evening blew about $50 buying stuff in Cherry on Top to give away to friends and family.  

Yes, the $600 (or $300) that people are using onboard do get recorded as revenue when used...  While it's not technically correct, it's close enough.  People are using their OBC instead of cash...  just a different payment type.

[Denverdonkeys]

1 hour ago, Buckeyefrank100 said:

The money they gave away as OBC doesn't count as revenue to Carnival.  When it's used onboard it is turned into that revenue.  So if they buy a drink package with OBC, CCL records revenue for that drink package and reduce the liability for OBC.  The accounting is no different than when they sell a GC.  At the sale, they record the receipt of the cash and the liability until the GC is redeemed and turned into revenue.  The OBC for covid was recorded as a liability and an expense (technically prepaid expense) to CCL when it was issued.  Upon use, it converts to revenue.  Nothing fraudulent at all.  It's accounting 101.

I dont agree with the GC analogy. there has to be an entry there because cash was received (hence unearned revenue), but the OBC being granted I don't think generates an entry. there is no obligation at the time of the OBC. I bet it reduces net revenues for onboard. credit revenue for the full cheers package, debit "OBC discounts" for the payment amount, debit cash for the amount over the OBC that hits Credit cards. 

 

the related expense is just the cost of alcohol (or whatever) in this case. you wouldnt put that up as a prepaid expense, because you dont know it and the expense is not equal to the OBC- they make a large profit on all that.

[BlerkOne]

At the end of the day, Carnival's cruises are cash flow positive.

[sfaaa]

According to this article, OBC is neither treated as revenue nor prepaid. Rather, it's accounted as liabilities. 

 

https://dsmobiletax.com/accounting-for-free-services-provided/

 

 

 

 

[skridge]

22 hours ago, BlerkOne said:

How is it misleading? Revenue is just that. Perhaps you are confusing revenue with income?

 

 

Unless anyone on this thread is really high up in the accounting department at CCL I have a hard time believing anyone can say definitively what Carnival is counting as revenue and what they are not counting as revenue.  I know the comparison to the gift card is absurd because with a gift card you have actual cash money revenue coming in and then that revenue is offset by goods going out.  With an OBC you have Carnival giving out the equivalent of a gift card that can only be used on board to people that have effectively paid them nothing for it other than rebooking a canceled cruise.  As I said in my previous post it is misleading if they are counting anything being purchased by an OBC as revenue.  I am a business owner and if I give something away without getting any money for it that is not revenue.

 

Edited November 12, 2021 by skridge
added last 2 sentences

[Buckeyefrank100]

14 hours ago, sfaaa said:

According to this article, OBC is neither treated as revenue nor prepaid. Rather, it's accounted as liabilities. 

 

https://dsmobiletax.com/accounting-for-free-services-provided/

 

 

 

 

That's only half of it.  At the point a customer's cruise is cancelled, there is nothing on the books.  The OBC offer is just that... a sales offer.    When a customer books a cruise and accepts the OBC, the following is entered:

 

Unearned Revenue                               CR                4000

Promo Discount ($600)                        DR           600

Liability for OBC                                      CR               600

Cash, CC Due, GC, etc                          DR            4000

 

Carnival is absolutely going to track the OBC given in a separate internal account but publicly it could be netted together as a net revenue number.

 

When the customer boards the ship the $600 liability for OBC will be posted to their account onboard.  Assume they buy 5 bottles of alcohol onboard for exactly $600, the shipboard accounting is as follows:

 

Alcohol Revenue                    CR          $600

Liability for OBC                     DR          $600

 

As you mentioned, there is a liability for OBC created, but that's only half the picture.