It will likely take until at least 2022 before the cruise industry fully recovers from the damage wrought by the global coronavirus pandemic, according to Arnold Donald, CEO of Carnival Corporation.
Speaking to Cruise Industry News in a frank and wide-ranging interview, the head of the largest cruise company in the world said the group would inevitably need to become “leaner” in order to emerge from the crisis.
“We will be leaner. There is no question about it. And we’ll be stronger,” he said, referring to the company’s decision to lay-off thousands of ship and shore-based employees. “Right now, we have no revenue. We have to slim down. We have to reduce overheads and we have to reduce our cash flow.”
Donald’s words stand in stark contrast to the company’s outlook at the end of 2019, when it was riding high on a growing wave of demand for cruises, with several of its largest-ever ships under construction and due to launch this year.
Carnival Corporation’s nine brands, operating more than 100 ships, were meant to carry around 12.5 million guests at double occupancy during 2020, representing around 45% of the total cruise market.
Instead, it has carried just 426,000, all in the first quarter before the global cruise industry suspended operations, and has reported a US $5.1-billion loss for the year so far. However, Donald has ruled out a down-sizing of the company.
“If we are literally sailing with no guests, there is no work for some people to do. We aren’t doing a lot of advertising right now; the work has gone away,” added Donald.
“We are taking the time now to see how we can do it smarter, better and more efficiently, so we can get even more done at a lower cost,” he said.
With it’s German cruise brand AIDA Cruises having begun the phased process of returning to cruising, with three ships initially, Donald said that demand is strong, but that’s to be expected of the current situation.
“If you think about it logically, there is pent up demand for travel, and very scarce access – we’re not talking the AIDA fleet – we are talking three ships. It is logical you would think there would be strong demand given the scarcity,” he said.
Italy and Spain are probably the next regions to open to cruising, he added, which would most likely see the Costa Cruises brand get back to sea. Carnival’s national brand portfolio is emerging as a key strength as each major cruise source market around the world continues to open up their economies.
Carnival Corporation owns cruise brands for the UK (P&O Cruises and Cunard), Australia (P&O Australia), Italy (Cost Cruises), and Germany (AIDA Cruises). It’s additional lines Seabourn, Princess Cruises, Holland America Line and Carnival Cruises are more reliant on US-based passengers.
“For a period of time, those national brands, performed very, very well and for a period time, because they are national brands, they can get caught up in whatever is going on in their region and not perform as well,” said Donald.
“Over time, we believe we have demonstrated as a company that having the portfolio of brands we have, allows us, over time, to generate great returns for shareholders,” he added.