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European, Mediterranean cruises cut prices amid high airfare, unrest

The Carnival Freedom cruises by St. Mark’s Square in Venice. Carnival sees a better picture for Europe next year, with 12 ships there.

Carnival Cruise Lines (2007)

The Carnival Freedom cruises by St. Mark’s Square in Venice. Carnival sees a better picture for Europe next year, with 12 ships there.


The great European cruise migration of 2011 has run into headwinds.

North American brands increased their presence in Europe this year hoping to charge higher fares and grow their audience. Royal Caribbean International has 11 ships — half its fleet — in Europe this year, up from eight last year. And Carnival Corp. has 25 percent of its capacity for North American brands in Europe this summer, compared with 17 percent last year.

But the high cost of air travel and unrest in popular ports of call, including Egypt and Tunisia, have dampened demand, forcing cruise operators to turn to discounts to fill the ships.

"It's always follow the leader," said Carolyn Spencer Brown, of "Somebody decides the market is going to be hot so they all go into it, it gets congested, the prices go down. It was no surprise whatsoever it happened in Europe."

Last month, officials with Royal Caribbean Cruises said they had managed to boost demand for cruises after a slump in Europe by lowering prices. The impact of fuel costs, the disaster in Japan and upheaval in Northern Africa and the Middle East prompted the world's second-largest cruise company to lower forecasts for the full year by 15 cents per share to a range of $3.10 to $3.30.

Last month, Carnival Corp. also lowered its expected earnings for the year, largely due to fuel increases and costs associated with itinerary changes forced by the Middle East unrest. Carnival Cruise Lines debuts its new ship, Carnival Magic, in Europe this week but will bring it to its year-round home port in Galveston, Texas, in November.

Royal Caribbean's reduced earnings expectations came amid good news for the company, which reported net income of $91.6 million, a nearly 5 percent increase over the same period last year. Net yields, or revenue generated per berth per day, increased 4 percent.

"The various natural and human events that are happening in the world began to have an impact on us near the end of what was otherwise a successful first quarter," Royal Caribbean International president and CEO Adam Goldstein said in a conference call with investors.

Higher fares in other areas including Alaska and the Caribbean offset the slumping prices in the Mediterranean, officials said. The company hopes to raise fares even more in the future.

"Going forward we're concentrating on being a little less of a value," said Royal Caribbean chairman and CEO Richard Fain. "You should expect to see us toeing the line on costs but pushing harder than ever to enhance our pricing."

That's part of the reason Royal Caribbean changed the schedule for one of its ships, Navigator of the Seas, which was to sail 14-night Eastern Mediterranean cruises through early 2012. Instead, it will be in the Mediterranean only until fall — a situation Goldstein described as "unique."

"We will perform substantially better by bringing this ship to the Caribbean than we could have by remaining in Europe for the winter," he said. But he added that the cruise operator is confident that Europe will perform well next year, when 12 ships will be positioned there. Sister company Celebrity Cruises will have its largest European deployment with six ships in 2012.

For this summer, huge deals on European sailings are numerous — for those who can afford to fly there.

The new Carnival Magic has 12-night cruises available from $849, said Stewart Chiron, a Miami cruise expert and CEO of Celebrity's Solstice ship has 12-night sailings from $899.

The discounts, he said, are seen across all cruise companies. "It is the times."

Mike Driscoll, editor of the weekly trade publication Cruise Week, said the European sailing season started strong before being derailed. U.S. travelers, he said, just don't want to shell out a bundle for air travel so they can take a cruise.

"If you're paying $1,500 for airfare for a $1,099 cruise, it's like why bother?" he said.

European, Mediterranean cruises cut prices amid high airfare, unrest 05/07/11 [Last modified: Saturday, May 7, 2011 4:30am]
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