Mass Market vs. Premium

With all the discussion about the future of mass market cruising, I
thought I'd state a few facts about Carnival Corp.

CCL is actually growing the premium brands (HAL and Cunard) faster
than Carnival. I really don't have time to add Princess/P&O stuff
here.

As of the beginning of 2003 -- well, I'll do a sort of table format

Line Ships Pax Capacity Pax %

Carnival 18 38,000 57
HAL 11 14.000 21
Costa 8 11,000 16
Cunard 2 2,500 3.7
Seabourn 3 600 .01
Windstar 3 600 .01

TOTAL 45 67000 100

New ships coming online through end of 2006 (includes Glory,
Oosterdam, and Costa Mediterranea):
% accretion

Carnival 4 11000 36 29
HAL 4 7400 24 53
Costa 3 7500 25 68
Cunard 2 4600 15 184

TOTAL 13 30500

Here is the same table, but using $$ spent rather than pax capacity,
i.e. showing capital expenditu

Carnival $185 31%
HAL $162 27%
Costa $126 21%
Cunard $119 22%
TOTAL $592

Carnival's buildout includes 3 Destiny class ships (Glory/Conquest)
and only one more Spirit class. All of HAL's are Vista class, i.e.
Zuiderdam and three more sister ships.

1) Money speaks a helluva lot louder than words, and what this tells
me is that Carnival is making a better profit margin from HAL and
Cunard than from Carnival.

2) The heavy Costa growth is more of a market opportunity thing, like
EuroDisney. There is less "penetration" of the European market,
currently. although the general vacation market for Europe is higher
than the US (Americans take about half as much vacation, on average,
as Europeans in the EU). The cruise market in Europe (that is, the
passengers' home, not where the cruise goes) has been growing at 12%
per year vs. 8% per year in North America. About 15% of the US
population has ever taken a cruise, as opposed to 3% of the people in
the continental EU (not counting the UK).

3) The Vista class ships are pointedly made to compete with
Celebrity's very successful Millie class ships -- I mean, how similar
could they make them without a direct carbon copy?

4) CCL is making more money from premium cruises in general. 50% of
its capital expenditures on new ships is going to Cunard and HAL,
which currently comprise less than 25% of its passenger capacity. I
actually think the ultimate figures will be even higher -- I would
anticipate more retirements in Carnival than in the HAL and Cunard
fleets.

5) I would thus say, in general, that Carnival expects more financial
growth in a higher-end market. While current HAL capacity is
one-third of Carnival's, HAL's future capacity buildout is two-thirds
of Carnival's in terms of passengers, and almost equal in terms of
dollars spent.

6) Carnival uses the following categories:
"Contemporary" -- CCL and Costa
"Premium" -- HAL and part of Cunard
"Luxury" -- Windstar, Seabourn, and part of Cunard

7) The marketing aims of Contemporary and Premium seem more sharply
defined in CCL's management than on the rtc boards. They really see
HAL and Cunard as very different products from Carnival.

Because of this, I am not sure what to make of the reports of
high-level service and food on Spirit class. My guess is that this is
made to compete with RCCL, especially the Radiance class ships -- sort
of "contemporary plus" category. I would thus anticipate some
future cost-cutting.

One thing is for su Cruising is going to become more and more
commoditized and less individualistic as these fleets continue to
grow.


Mason Barge

"If this is coffee, please bring me some tea. If this is tea, please bring me some coffee."
-- Abraham Lincoln

Interesting analysis. Thanks.

HAL Premium?
Hmmm, not by my standards.