CCL High Debt /what is Your Opinion

[LocoLoco1]

Always tough when any Corp. has HUGE $Debt$. And CCL has huge huge HUGE debt. Creditors always call the shots. Mid-2023 and this talk of Recession is still just talk and it’s already no more Cashews at HappyHour... But when it hits… hoo-boy. 

[Guest ldtr]

48 minutes ago, BermudaBound2014 said:

 

Did you type that with a straight face? I can't tell if you are serious.

 

34 Billion in debt and you expect no difference to the cruising experience compared to when the company was flush, inflation was nil, and there wasn't a war?  Defies basic logic. 

 

Something has to give on the consumer end. I suspect some fairly major changes in the next few years.  At this point I'm going to let time tell the story.

Nope do not.  When they were flush the money went into dividends, stock buybacks, new ships, new private ports. Still people complained about changes and cutbacks whenever there were changes.

 

Now that money is going to pay off debt, while operations continues on a pretty much the same pace. No stock buy backs, no dividends, limited new ship orders (probably none for 2 to 3 years) no new private ports, bit operations will continue as it has in the past balancing customer demand, pricing, demographics, etc at about rhe same level of change.

 

 

 

 

[Guest ldtr]

Here is a little data set I put together looking at key economic indicators by passenger day for the last 10 years.  I feel that looking at data by passenger day gives a good idea about what is actually going on when it comes to operations. Gives one an idea on exactly things have changed or not changed over the years.  IN it you can see the impact of fuel in 2022 but that is being moderated to some degree in 2023 and will moderate more if occupancy continues to go up.  Also a clear impact on food costs.  Overall operating costs compared to previous years are more a function of occupancy with an additional impact of inflation.  Though you can how much that dropped with the occupancy increase from 75% in 2022 to 91 in Q1 2023.

 

This is combined data for all CCL companies.  Just as a note average cruise length has gone from 7.73 in 2013 to 7.09 in 2023 Q1 with a fairly steady gradual drop. I think that this is reflecting the tendency to shorten routes as ship sizes have increased

Per Pass Day	Revenue	Fares	Shipboard	Operating Expense	Fuel	Food
2013	198.64	149.70	46.24	136.81	28.38	12.63
2014	200.77	150.27	47.78	131.72	25.70	12.70
2015	193.96	143.19	47.98	116.61	15.42	12.11
2016	193.44	142.70	48.02	110.75	10.80	11.86
2017	200.90	148.51	49.68	120.48	14.27	11.83
2018	210.59	155.37	52.19	123.68	18.06	11.89
2019	223.04	151.06	67.81	138.26	16.73	11.60
2022	222.86	128.61	94.27	215.33	39.51	15.81
2023 Q1	219.41	142.08	77.38	163.91	26.49	15.40

Edited June 22, 2023 by ldtr

[mowogo]

5 hours ago, LocoLoco1 said:

Always tough when any Corp. has HUGE $Debt$. And CCL has huge huge HUGE debt. Creditors always call the shots. Mid-2023 and this talk of Recession is still just talk and it’s already no more Cashews at HappyHour... But when it hits… hoo-boy. 

CCL has already been playing around with cheap conversions so they have relatively little downtime shifting from Costa to Carnival, and likely could get away with even less work for conversion to HAL. I genuinely think the next cycle of business changes is to get ready for cutting weaker parts of the operation, and getting relatively new ships with lines that are likely to survive the next recession.

[HappyInVan]

8 hours ago, ldtr said:

Per Pass Day	Revenue	Fares	Shipboard	Operating Expense	Fuel	Food
2013	198.64	149.70	46.24	136.81	28.38	12.63
2014	200.77	150.27	47.78	131.72	25.70	12.70
2015	193.96	143.19	47.98	116.61	15.42	12.11
2016	193.44	142.70	48.02	110.75	10.80	11.86
2017	200.90	148.51	49.68	120.48	14.27	11.83
2018	210.59	155.37	52.19	123.68	18.06	11.89
2019	223.04	151.06	67.81	138.26	16.73	11.60
2022	222.86	128.61	94.27	215.33	39.51	15.81
2023 Q1	219.41	142.08	77.38	163.91	26.49	15.40

 

Thanks for all the work. The data confirms what we have been discussing.

 

Cruise fare per pax is lower in 2023 than 2013 or 2019. I presume that these numbers have not been adjusted for inflation.

 

As expected costs per pax has risen. Now, 20% higher than 2013. Fortunately, total revenue is 10% higher than 2013, but lower than 2019.

 

For HAL management, this is a grim situation. IMO, onboard revenue has likely topped out. So, HAL needs to raise cruise fare by 20% to show a positive bottom line. No surprise that the ships have been vigorously cutting costs.

 

CCL's debt load is a major impediment and risk. Assuming that they can cut $20b in debt in the next 10 years, they will need to pay down $2b a year. That's half a billion a quarter. In addition to the $3b interest expenses per year.

 

That's why I think that CCL will eventually sell some of its brands, in order to raise cash. Who will buy? IMO, the sovereign wealth funds are the best candidates. They're not interested in a couple of ships. Its not worth the effort. They're interested in multi-billion $ investments.

 

[Mary229]

@HappyInVan and @ldtr  yes, thank you for the work.  I have not calculated but now the fares are increasing especially with the introduction of the new ultimate journeys where the daily rates are closer to the prices of grands.  Judging by the roll calls the ultimates are enjoying immense popularity.  With the exception of the two mass markets of Alaska and the Caribbean I have noted large fare increases for mid 2024 and beyond.  I just wonder what is the percentage of increase and if it is enough to compensate for inflation of the past 4 years.  
 

 

[Haljo1935]

The increase @Mary229 mentioned is impacting our ability to cruise and is causing us to make difficult decisions. We are not able to be gone for weeks at a time (still work full time), so the longer itineraries are not a draw for us.. paying significantly more for decreased services is hard to swallow. 

We will continue to sail with all of CCL (HAL 4* w/history on Princess & Carnival), just not with the same frequency as we have been doing. I assume we are not alone.

[Guest ldtr]

4 hours ago, HappyInVan said:

 

Thanks for all the work. The data confirms what we have been discussing.

 

Cruise fare per pax is lower in 2023 than 2013 or 2019. I presume that these numbers have not been adjusted for inflation.

 

As expected costs per pax has risen. Now, 20% higher than 2013. Fortunately, total revenue is 10% higher than 2013, but lower than 2019.

 

For HAL management, this is a grim situation. IMO, onboard revenue has likely topped out. So, HAL needs to raise cruise fare by 20% to show a positive bottom line. No surprise that the ships have been vigorously cutting costs.

 

CCL's debt load is a major impediment and risk. Assuming that they can cut $20b in debt in the next 10 years, they will need to pay down $2b a year. That's half a billion a quarter. In addition to the $3b interest expenses per year.

 

That's why I think that CCL will eventually sell some of its brands, in order to raise cash. Who will buy? IMO, the sovereign wealth funds are the best candidates. They're not interested in a couple of ships. Its not worth the effort. They're interested in multi-billion $ investments.

 

My understanding is that revenue is booked when the cruise is taken, not when it is booked. That means that the fares are reflecting the low prices during the early days of the restart not current fares. It will be a mix of purchase dates with the median probably about a year ago, maybe even earlier.

 

The expense per passenger is heavily influenced by the occupancy. the large drop between 22 and q1 23 was to a large degree the result of the improved occupancy going from 75% to 91%. Most operational expenses are pretty fixed for a given route (fuel, personnel, etc) no matter the occupancy. Food on the other hand does vary with occupancy thus the lower change there.

 

 

[Mary229]

4 minutes ago, ldtr said:

My understanding is that revenue is booked when the cruise is taken, not when it is booked

Ditto.  That is how industry insiders have explained it to me

[Guest ldtr]

1 hour ago, Mary229 said:

@HappyInVan and @ldtr  yes, thank you for the work.  I have not calculated but now the fares are increasing especially with the introduction of the new ultimate journeys where the daily rates are closer to the prices of grands.  Judging by the roll calls the ultimates are enjoying immense popularity.  With the exception of the two mass markets of Alaska and the Caribbean I have noted large fare increases for mid 2024 and beyond.  I just wonder what is the percentage of increase and if it is enough to compensate for inflation of the past 4 years.  
 

 

Unfortunately I have not found any good data source that allows one to easily track fare changes in mass across a cruise line. I am still looking for a source and putting together a data set.

 

I am looking at what is going on in the rest of the travel industry. Resort hotels have gone up 65% in the US in one year in 22. I am expecting fares to go up between 25 to 50% depending upon cruise length and location between the start of 23 and the end of 24 to restore the past pricing relationship with other travel businesses. 

 

The pricing power will depend upon how sticky the pricing is in the other travel segments. Hotels have come back down slightly in 23.

 

 

Edited June 23, 2023 by ldtr

[Guest ldtr]

Since most ship  costs are  fixed it is pretty easy to project how operating expenses will be impacted by a change in occupancy. I will do it when I get a chance. I expect that going from 91% to 100% will take down into the low 140s per passenger day. Pretty close to the 2019 number.  Fuel is the most erratic category. Cruise lines have shown very good consistency on other expenses as demonstrated by there food spend per passenger day.

 

Note the approximately 7 dollar drop in revenue around the 2016 economic down turn. That is probably a good indicator of the potential impact of a mild recession on revenue.

Edited June 23, 2023 by ldtr

[LocoLoco1]

Kibitzing about a HAL cruising experience Post-Covid can’t ignore a BIG issue, the competition is equally pinched. Methinks all cruiselines want to desperately get us aboard  then $up-sell$ at every chance. OK, that’s fine by me, however, if we in fact move to a pricier line for a better experience we should be aware they are in similar straits. An old adage comes to mind: ‘This is a Non-profit operation. We didn’t plan it that way, it just happened.’ I will continue to cruise….

[HappyInVan]

1 hour ago, ldtr said:

My understanding is that revenue is booked when the cruise is taken, not when it is booked. That means that the fares are reflecting the low prices during the early days of the restart not current fares. It will be a mix of purchase dates with the median probably about a year ago, maybe even earlier.

 

 

We'll only know when the last minutes deals (marginal price) are made. HAL initially lists new cruises at the prices they like to sell the rooms at. For the less popular routes, the prices slip over time to historical norms.

 

That said, prices will firm up in the next few years as demand catches up with supply; unless the industry adds new capacity. Oops! MSC is adding massive new ships and are moving into the West Coast. Explora is adding multiple ships. So, HAL is being bracketed by aggressive competitors in the big ship and Prinsendam-size segments.

 

At the moment, there's already no shortage of deals in the industry.

 

 

[Guest ldtr]

1 minute ago, HappyInVan said:

 

We'll only know when the last minutes deals (marginal price) are made. HAL initially lists new cruises at the prices they like to sell the rooms at. For the less popular routes, the prices slip over time to historical norms.

 

That said, prices will firm up in the next few years as demand catches up with supply; unless the industry adds new capacity. Oops! MSC is adding massive new ships and are moving into the West Coast. Explora is adding multiple ships. So, HAL is being bracketed by aggressive competitors in the big ship and Prinsendam-size segments.

 

At the moment, there's already no shortage of deals in the industry.

 

 

There has never been a shortage of deals. Cruise lines are a lot like airlines deals applied at key times to attract interest and to fill the otherwise unsold seats. Both are pretty effective at maximizing revenue with their pricing approach.

 

What we do not have access to is when the bookings are made. What percentage are during the deals. With a higher percentage of revenue shifting to onboard with the packages the mass market lines can play more with deals if they feel the need to. 

 

 Note how consistent the annual revenue per passenger was prior to 2019. Lots of deals during this time frame as well.

[BermudaBound2014]

24 minutes ago, ldtr said:

There has never been a shortage of deals. Cruise lines are a lot like airlines deals applied at key times to attract interest and to fill the otherwise unsold seats. Both are pretty effective at maximizing revenue with their pricing approach.

 

What we do not have access to is when the bookings are made. What percentage are during the deals. With a higher percentage of revenue shifting to onboard with the packages the mass market lines can play more with deals if they feel the need to. 

 

 Note how consistent the annual revenue per passenger was prior to 2019. Lots of deals during this time frame as well.

 

Personally, I have found the 'deals' better right now than they were pre-covid, especially on the regular Alaska and Caribbean runs. Doing a 14 night B2B on the Nieuw Amsterdam anytime this season for $660 is an attractive price point without open jaw air. 

 

 

 

 

But deals are out there for longer itineraries too, and not just last minute. I would take that 14 night repositioning cruise but will just be getting back from a 3 week hiking trip to Yosemite. A balcony on that 14 nights sailing is currently $799.  We will pay more for 3 nights hotel in the park than 14 nights on the cruise.

 

 

 

Edited June 23, 2023 by BermudaBound2014

[Guest ldtr]

1 hour ago, BermudaBound2014 said:

 

Personally, I have found the 'deals' better right now than they were pre-covid, especially on the regular Alaska and Caribbean runs. Doing a 14 night B2B on the Nieuw Amsterdam anytime this season for $660 is an attractive price point without open jaw air. 

 

 

 

 

But deals are out there for longer itineraries too, and not just last minute. I would take that 14 night repositioning cruise but will just be getting back from a 3 week hiking trip to Yosemite. A balcony on that 14 nights sailing is currently $799.  We will pay more for 3 nights hotel in the park than 14 nights on the cruise.

 

 

 

A cruiselines pricing needs to accomplish different goals beyond maximizing revenue. It also needs to attract new cruises, increase occupancy,  get people that stopped cruising to get back used to cruising again. There is also the calender factor, different demands at different times of the year.  All in all a very dynamic pricing environment that uses deals and other methods to meet all its goals. The only real leading indicator that we have access to is the balance of payments received for cruises not yet taken and that is primarily a 90 to 120 day preview due to the nature of the funds in there. Unless one has access to the full set of pricing for all cruises and all cabin classes and have a model to analyze that on a daily granularity there is not a good way to really see how pricing is going on the front in.

 

Another practice that skews things from the prices listed is when they keep lower category cabins lower than higher category cabins. Makes the prices seem very low but with a larger delta between insides and balconies and suites.

 

I am currently looking for a source where I can program a scrapper to pull in all listed prices for all categories on all listed cruises, along with destination, length, ship name.  Once I gave that then slicing and dicing by a number of categories becomes easily down, including trends over time.

 

Would be very interesting to see pricing by length or ship size for example as will as looking at  seeing if there are any trends for best price patterns based upon time to actual cruise date beyond the dropd right after final payment due date.

 

I do expect all of the lines to have more deal pricing flexibility on fares than pre covid due to the higher revenue percentage coming from onboard due to the sale of packages. 

Edited June 23, 2023 by ldtr

[BermudaBound2014]

I'll be interested to see your pricing program. I have a spreadsheet of pricing I've kept since the mid 90's. Unfortunately, it's only for cruises I was interested in, not the market as a whole. 

 

I can say without a doubt that my bus runs to the Caribbean for January of 2024 are some of the cheapest cruises I've ever taken!! Seriously cheaper than staying home when you consider I can turn down the heat in my house and save about the entire cost of both cruises. 

 

I still stand firm that cruise lines don't need to discount to these levels when demand is high. Not to mention the casino free offers. It's obvious to me that some of HAL's itineraries are not in high demand and no where near 100% occupancy. They may get to 100% occupancy by giving away casino offers and $35 a day offers, but I'm not sure that's a sustainable business plan in the long run.

 

 

Edited June 23, 2023 by BermudaBound2014

[Guest ldtr]

1 hour ago, BermudaBound2014 said:

I'll be interested to see your pricing program. I have a spreadsheet of pricing I've kept since the mid 90's. Unfortunately, it's only for cruises I was interested in, not the market as a whole. 

 

I can say without a doubt that my bus runs to the Caribbean for January of 2024 are some of the cheapest cruises I've ever taken!! Seriously cheaper than staying home when you consider I can turn down the heat in my house and save about the entire cost of both cruises. 

 

I still stand firm that cruise lines don't need to discount to these levels when demand is high. Not to mention the casino free offers. It's obvious to me that some of HAL's itineraries are not in high demand and no where near 100% occupancy. They may get to 100% occupancy by giving away casino offers and $35 a day offers, but I'm not sure that's a sustainable business plan in the long run.

 

 

Again the Caribbean and then Alaska are the two most competitive markets in that order. Whereas HAL has some advantages in Alaska. RCL brands have always focused on the Caribbean in the amount of capacity they keep there. I consider the 7 day cruises in the Caribbean and to some degree in Alaska to be kind of the introductory pricing for CCL brands, especially HAL and to some degree Princess. Prices in those two markets will tend to be the lowest per day fares.

 

It will be interesting to see the trends if I can find a source I can automate. Unfortunately most intentionally move to make it difficulty. The closest I have gotten so fare is to scrape a list of cruises for a company from one site then use a script to enter each cruise individually to get the category fares. It sometimes works sometimes does not. Continuing to work on it.

 

Unfortunately the data will start once I get it to work, no historical data only building a database going forward.

Edited June 23, 2023 by ldtr

[Guest ldtr]

Was just listening to a segment on CNBC talking about the cruise industry. A couple of main points.

 

1. According to the speakers data (an analyst) fares are only about 5% higher than 2019 at this time

2. He expects all 3 lines to be back at 2019 occupancy levels later on this summer.

3. in 2019 the cruise lines were 20 to 30% cheaper than an equivalent land based vacation and with the increases in the other travel segments it is more like 40 to 50% now.

4. He expect cruise lines to start using more pricing power when occupancy levels are back

5. Even if there is a recession he expects 23 to be better than 22 and 24 to be better than 23.

Edited June 23, 2023 by ldtr

[HappyInVan]

31 minutes ago, ldtr said:

Again the Caribbean and then Alaska are the two most competitive markets in that order.

 

Of course. Ditto for the Mediterranean. And, the overwhelming majority of HAL's ships are in these markets. HAL has to be in these large markets because its ships have become too large to wander places unseen.

 

I'm impressed by your perseverance. You are entitled to your opinion. But, the numbers don't lie. $34b in debt is a very large amount of money; and HAL is barely able to keep its head above water because of the amount of debt servicing.

 

Edited June 23, 2023 by HappyInVan

[HappyInVan]

Just now, HappyInVan said:

 

Of course. Ditto for the Mediterranean. And, the overwhelming majority of HAL's ships are in these markets. HAL has to be in these large markets because its ships have become too large to wander places unseen.

 

I'm impressed by your perseverance. You are entitled to your opinion. But, the numbers don't lie. $34b in debt is a very large amount of money; and HAL is barely able to keep its head above water because of the amount of debt servicing.

 

 

 

 

[Guest ldtr]

1 minute ago, HappyInVan said:

 

Of course. Ditto for the Mediterranean. And, the overwhelming majority of HAL's ships are in these markets. HAL has to be in these large markets because its ships have become too large to wander places unseen.

 

I'm impressed by your perseverance. You are entitled to your opinion. But, the numbers don't lie.

 

 

 

 

They are in the large markets because they need to be  Not many other places to put ships in the summer. Especially since Asia is not back yet. Alaska and Europe pretty much the only choice this time of year. HAL tend to do more northern Europe than some of their competition with some more unique home ports there. In the winter a bit more options with south Pacific, Australia and New Zealand ( though they are still behind on the restart)

[Guest ldtr]

23 minutes ago, HappyInVan said:

 

Of course. Ditto for the Mediterranean. And, the overwhelming majority of HAL's ships are in these markets. HAL has to be in these large markets because its ships have become too large to wander places unseen.

 

I'm impressed by your perseverance. You are entitled to your opinion. But, the numbers don't lie. $34b in debt is a very large amount of money; and HAL is barely able to keep its head above water because of the amount of debt servicing.

 

Don't you mean CCL, since they are the holder of the debt.  Sure it is a large amount of money. The size of the revenue stream for the business is also pretty large. A fair amount of the debt is long term at very favorable rates. A fair share comes from countries where ships are built and as such those countries have a major interest in keeping the cruise lines going to keep the demand going for new ships.

 

The debt is more on an impact on new capital investment, than on operations. If CCL demonstrates that they are cash flow positive this new 10Q, at this stage of the recovery, it will certainly be a good sign of their ability to handle the current debt levels.

 

I am just responding with what I am seeing and the data I have. 

 

We will see over the next few years, but I am pretty comfortable in CCL and RCL to handle their debt levels. A little less comfortable with NCLH based upon some of their recent staffing moves.

 

Do not know why some seem to have chicken little syndrome as far as cruise lines are concerned. With some, with HAL in particular it predated covid and the debt.

Edited June 23, 2023 by ldtr

[BermudaBound2014]

25 minutes ago, ldtr said:

I am just responding with what I am seeing and the data I have. 

I’m sure you are a very nice Man. But we all know that anyone can crunch the numbers until they confess. I suspect that’s exactly what you are doing because you are emotionally invested in cruising. Not to mention financially invested since you stated you have 125 days booked in the next year. You are missing big chunks of data. There is a significant cost to servicing debt.

 

Im also comfortable with CCL handling debt. They have lots of assets to sell should it come to that. Are you saying you are comfortable with CCL as it sits? No downsizing?

 

28 minutes ago, ldtr said:

We will see over the next few years, but I am pretty comfortable in CCL and RCL to handle their debt levels. A little less comfortable with NCLH based upon some of their recent staffing moves.

[Mary229]

As to the debt, there is an old truism used by Trump in his formative years - owe as much as possible then it is in everyone’s best interest to keep you afloat.  I still think CCL understands the leisure industry though they grapple with it at times but they definitely understand the maritime industry having a great network of vendors, ports and suppliers.