Think it’s expensive when you have to take your car to the shop for repairs? It’s nothing compared to the $50 million we estimate that Carnival stands to lose due to unscheduled repairs on Carnival Vista.
With the ship headed to Freeport in the Bahamas for repairs and not carrying passengers from July 9 to July 27, the costs to the cruise line add up fast.
Vista’s Problems with Propulsion
A problem with Vista’s propulsion has recently caused a series of alterations to its schedule this summer. The issue with the vessel’s maximum cruising speed meant the ship could only travel at reduced speeds.
This forced the cruise line to change the Galveston-based vessel’s June 15 itinerary. The ship’s June 22 sailing also departed one day late, and was extended from seven to eight nights. That schedule change required the ship’s scheduled June 29 sailing depart two days late.
That’s just the start of the interruptions, however. Three of Vista’s cruises, originally scheduled to sail from Galveston July 6, July 13, and July 20, have now been cancelled completely. Vista will complete its July 1 sailing on July 9, and then will be out of service for most of July — the peak of the cruise season. During the ship’s nearly three-week drydock, repairs will be made to the ship’s azipods (its propulsion system), according to the company. Vista will resume sailing July 27, departing from Galveston for a 7-day cruise.
In other words, the ship will be out of commission for most of the month, affecting thousands of passengers.
To compensate passengers for the schedule change, Carnival offered passengers on the June 23 and July 1 voyages onboard credit, as well as a 50% future cruise credit. Guests who opted to cancel rather than sail on the altered schedule received a full refund, plus a 50% future cruise credit.
Carnival guests booked on the cancelled voyages will receive a full refund on that cruise, plus 100% future cruise credit. The cruise line has also offered to reimburse passengers for airfare fees and any other expenses resulting from schedule changes or cancelled sailings.
How Much Is This Costing Carnival?
You can imagine that such a big disruption in the cruise schedule can cost a pretty penny. We decided to dig into the numbers to estimate how much it might cost the cruise line.
According to our analysis, Carnival Corp. made $211 per passenger, per day across all its cruise lines last year. Meanwhile, its occupancy rate for the year across all lines was 106.9%.
Carnival Vista has a 3,934-passenger capacity, but with a 106.9% occupancy rate we can estimate that the average Vista cruise carries 4,205 guests. That means that with each lost day of Vista sailings, Carnival loses $887,255 in revenue. With Vista out of service for seventeen full days, Carnival will lose over fifteen million dollars by our estimates.
Keep in mind that figure does not include the additional costs associated with compensating passengers for schedule changes and cancelled voyages.
Nor does it include the cost of drydock repairs. Cruise lines typically spend $2 million per day on ships during routine drydock repairs, according to industry sources. While the specifics of the fix for Carnival may be different, at $2 million per day, that would come to $34 million for repair costs, in addition to $15 million in lost income — or nearly $50 million total.
As Cruise Industry News reported last week, a Carnival financial filing shows an $0.08 to $0.10 per share impact from the combination of cancelled cruises, passenger refunds, and future cruise credits extended to ensure passenger goodwill.
With about 525 million shares outstanding, that’s roughly $42-53 million.
Carnival’s Summer of Curveballs
The expensive Vista repairs continue a pattern of unplanned expenses affecting Carnival’s bottom-line. In early June, Carnival Corporation agreed to pay $20 million and to follow a new compliance plan after failing to follow the terms of their probation for environmental crimes. Meanwhile, the Cuban cruise ban has also impacted the company’s operations.
Carnival Corporation is large enough that these incidents are unlikely to affect its long-term financial health. Still, we wouldn’t be surprised if Carnival finds some way to pass these costs onto passengers in the form of higher fares or higher onboard costs in the future.
Were you among those affected by Vista’s schedule changes and voyage cancellations? Are you pleased by the way Carnival handled the situation? Let us know in the comments below…