Cruise Line Onboard Revenues Off the Charts

[Bgcruising]

5 minutes ago, Denverdonkeys said:

I am a CPA and public acountant. I agree with you, you have to go through the guidance, but they owe you nothing if the cruise is cancelled. 

A certified public accountant and a public accountant that is not necessarily certified?

[Denverdonkeys]

Just now, Bgcruising said:

A certified public accountant and a public accountant that is not necessarily certified?

you can be a CPA and not work in public accounting. a CPA just means I passed a test when I graduated college. but yes.... touche!

 

[Bgcruising]

So here is their quarterly income statement....

[Bgcruising]

In comparing to previous quarters I would say the onboard revenue is explosive...

[Buckeyefrank100]

11 minutes ago, Denverdonkeys said:

but when the cruise does not happen what do they pay you? not the OBC. same with if you rebook, you lose the OBC. the contractual obligation is there when the customer cruises, and meets their obligations.

 

When a contract dissolves for whatever reason, the legal requirements generally go away to the extent possible.  All courts and legal considerations will attempt to the best of their ability to put both parties back to the same position they were in before the contract was entered into.... in this case, the refund of the cash paid for is all that was given, so that is all that goes back.   

 

Let me give you an over the top example but it's the same principals.  You enter a contract to buy an existing house and you negotiate that the seller is to pay you $5000 for something at closing..  That is a legal liability for the seller when it's signed.  When you bail on the contract and don't close on the house, you forfeit the $5000 in closing costs.  Same thing with Carnival... if either party cancels the cruise, the $600 doesn't apply....   Technically (for covid) it would attach to the next contract.

[Denverdonkeys]

12 minutes ago, Bgcruising said:

Let's all look at their financial statement and see what we come up with. 

This is the best conversation I have seen here in a while!

I looked through SEC filings and they are silent on credits. They do talk about breaking out the parts of a bundled deal, but high level. I am more interested to see if they report it in revenue, cost of revenue, or operating expenses. It seems like a sales discount to me. But I could also see and argument for marketing expense. I didnt see anything in there.

[Bgcruising]

It seems someone saw the latest quarter revenues was nearly ten times of what it was last quarter, but failed to mention that it is a fifth of what it was for period ending 2/29/20.

[Denverdonkeys]

2 minutes ago, Buckeyefrank100 said:

When a contract dissolves for whatever reason, the legal requirements generally go away to the extent possible.  All courts and legal considerations will attempt to the best of their ability to put both parties back to the same position they were in before the contract was entered into.... in this case, the refund of the cash paid for is all that was given, so that is all that goes back.   

 

Let me give you an over the top example but it's the same principals.  You enter a contract to buy an existing house and you negotiate that the seller is to pay you $5000 for something at closing..  That is a legal liability for the seller when it's signed.  When you bail on the contract and don't close on the house, you forfeit the $5000 in closing costs.  Same thing with Carnival... if either party cancels the cruise, the $600 doesn't apply....   Technically (for covid) it would attach to the next contract.

so do you think a real estate company that has a contract to sell a house, but not closed on the house before period end, accrues for those closing costs? Of course not. They recognize the cost (probably a reduction in net revenue) when they close the sale. same for the OBC.

[Buckeyefrank100]

2 minutes ago, Denverdonkeys said:

I looked through SEC filings and they are silent on credits. They do talk about breaking out the parts of a bundled deal, but high level. I am more interested to see if they report it in revenue, cost of revenue, or operating expenses. It seems like a sales discount to me. But I could also see and argument for marketing expense. I didn't see anything in there.

That is a good question but I don't necessarily think I would expect that level of detail in a quarterly report.  That would probably be a good subject for the annual report and the discussion of events from the year made by the CEO.

[BlerkOne]

10 minutes ago, Bgcruising said:

So here is their quarterly income statement....

For Carnival Corp, and not all cruise lines under the Carnival umbrella were giving away OBC. Carnival doesn't release financials for the individual cruise lines.

[Denverdonkeys]

2 minutes ago, Bgcruising said:

It seems someone saw the latest quarter revenues was nearly ten times of what it was last quarter, but failed to mention that it is a fifth of what it was for period ending 2/29/20.

easy to be up YoY! I hope they have some other detail that looks at it per customer.

[icft]

It has been decades since I was an auditor but Buckeyefrank100 has pretty well laid out the situation.

The article in question states some facts presented by cruise line management. However if you listened to the entire Carnival earnings call the management did discuss Carnival’s bottom line. The article just reported on one small part of the earnings call, perhaps thinking cruisers (after all it is “Cruise Industry News”) might be interested in this topic.

I don’t see how anyone lied or misled anyone. The article did not say buy stock because the industry is doing great. It simply said people are spending more than usual on the ships. That same publication probably also reports on how people love some new feature on some ships when that occurs. If this article had been in a financial publication then I would think the author was deficient in not putting the information in financial context but that is not the case here.

[Bgcruising]

2 minutes ago, BlerkOne said:

For Carnival Corp, and not all cruise lines under the Carnival umbrella were giving away OBC. Carnival doesn't release financials for the individual cruise lines.

Well we do know that the ones that sail with that whale's tail didnt have revenue of any type greater than this.

[Buckeyefrank100]

2 hours ago, Denverdonkeys said:

I don't think it meets the definition of a liability. They have received nothing (like cash for unearned revenue) when you choose the FCC and OBC (only talking about the OBC here, since the FCC is equal to what you had paid, so that is clearly unearned revenue). They gave you a coupon, that coupon has no value until spent. No store records a coupon when they mail them out.

It doesn't matter what they've received. 

 

The definition of a liability is a financial obligation of a company that results in the company's future sacrifices of economic benefits to other entities or businesses.

 

When a cruise is booked and the contract is signed, the OBC is a legal financial obligation to Carnival.  The amount and timing are known.

 

With that being said, it really doesn't matter when it becomes a liability to the original question.  Whether the liability exists at booking or upon embarkation, the result is the same.  The obc is used to purchase goods and services and those are recorded as revenue on the ship.

[Earthworm Jim]

20 hours ago, IntrepidFromDC said:

I have never lost $2,000 on a cruise gambling, but those free balcony seven-day cruises are worth more than $2,000 so I often wonder how that works. 

 

Perhaps that's a cabin that wouldn't have sold, so they aren't losing $2000 someone else would have paid for the cabin, they're gaining $500 (or whatever you might lose gambling) and whatever other things you pay for onboard on a cabin that would otherwise be empty. Though if you were getting those offers pre-Covid, that theory is wrong because they used to pretty much sell every cabin one way or another. Now I don't think that's the case.

 

Still, that leaves the question of why make $500 on a $2000 balcony cabin when you could just fill it by cutting the price to $1000? Perhaps they fear giving those low rates to to general public would condition us to be unwilling to pay for $2000 cabins anymore, so it would hurt more than it helps in the long run.

 

Another factor may be that perhaps their statistics show that gamblers tend to spend more money on other things onboard aside from gambling compared to non-gamblers, so are better customers to have.

[Pjnc]

22 hours ago, Schoifmom said:

 

I have never paid "brochure rate" and always get my stockholder OBC.  Was there a reason given when they denied it?

Hi  

We had no obc from discounted cruises nor obc for this cruise.  Booked the rate that came up when I entered all the information  age, past passenger.  So if those rates are highly discounted rates  I apologize for my statement.  But I have always booked either of those rates and have gotten my shockholder credit for 18 prior cruises.

 

Their answer   Ongoing they are not recognizing discounted rates.  I do not feel that $500+ per person for a interior cabin is deeply discounted.

 

Thanks

pat

murrells inlet, sc

[Bgcruising]

So here are the accounts carnival put my credits in once I spent them. Before use, they were offset by "non refundable unused credit", I believe.

Edited November 26, 2021 by Bgcruising

[BlerkOne]

Casino rates, high or low, seem to be disqualifying for OBC these days. Win some, lose some.