After three and a half years of a pandemic, a halt in operations, relaunching its fleet and navigating a new normal, the world’s largest cruise company turned its first quarterly profit since early 2020. 

Not only did Carnival Corp. report net income of $1.07 billion for the third quarter, but it hit an all-time revenue high of $6.85 billion. 

The company, which operates nine cruise lines, said average occupancy was 109%, up from 98% in Q2, and that demand returned for its European brands after lagging behind those in North America.

“It is gratifying to see the power of our portfolio deliver as our continental European brands have stepped up nicely,” said Josh Weinstein, Carnival Corp. CEO.

Demand for those lines picked up throughout the year, with Costa and Aida hitting 119% occupancy in August, he said. P&O achieved its highest occupancy in a decade despite a 40% growth in capacity since 2019.

Carnival Corp., which also includes Carnival Cruise Line, Princess, Holland America Line, Seabourn and Cunard Line, saw customer deposits reach a record $6.3 billion, up from the previous record of $4.9 billion in 2019’s Q3. Booking volume also hit a record level companywide during the third quarter, Weinstein said. 

For the second quarter in a row, he said the company’s booked position “is as far out as we’ve ever seen it.” 

During the Q3 earnings call with investors, Weinstein said this demand will set up the company for a strong 2024 with a return to historical occupancy levels and bookings at higher prices. 

However, high fuel costs, inflation, a trio of ships debuting in 2024 and an 18% increase in drydocks will increase costs over the next year, he said.

Despite beating expectations, those cost concerns sent Carnival’s stock price down about 14% in the days following the earnings news. 

Carnival Corp. was the last of the Big Three cruise companies to return to profitability since the pandemic began. Royal Caribbean Group turned its first quarterly profit in the third quarter of 2022, the same quarter the CDC dropped Covid restrictions such as mandatory testing, while Norwegian Cruise Line Holdings posted a profit during the second quarter of this year. 

Consumers keep spending

The strong quarter for Carnival Corp. came despite concerns that inflation would damage consumers’ willingness to spend. 

“We appreciate there are heightened concerns around the state of the consumer as of late, but the fact is we just haven’t seen it in our bookings or our results, and we believe consumers are continuing to prioritize spending on experiences over material gifts,” Weinstein said.

That trend bore out in onboard spending, he said. Over the first three quarters of the year, onboard spending has remained strong and consistent, Weinstein said. 

“Literally, they’re spending the same today that they were three quarters ago, and we haven’t seen that slow down,” he said. 

Weinstein said guests have pre-booked about 40% of their onboard purchases, an 11 percentage point increase from 2019.

There was concern that onboard spending would slow once customers used up their future cruise credits, said Assia Georgieva, a chartered financial analyst and principal at Infinity Research. But that hasn’t happened, she said, as onboard spending has continued to be a strong driver of revenue and hasn’t waned amid concerns about a recession or inflation.

“We’ve been talking about the potential recession since the beginning of this year. And obviously, that hasn’t happened,” she said. 

Another indicator of strong demand during the quarter is the increase in new-to-cruise guests, Weinstein said, with first-time cruisers reaching 170% of 2022 levels.

Despite Carnival Corp.’s slower recovery compared to its peers, the brands have performed well for host agency KHM Travel Group, said Geoff Cox, KHM’s vice president of sales and marketing. 

KHM saw 50% growth in revenue with Holland America Line and Princess over last year and said revenue with Carnival Cruise Line is expected to more than double by year’s end. Lines like Carnival that have access to the drive market thrived amid high airfares, Cox said. 

Overall, he said, the economy and inflation haven’t affected KHM sales. 

“We are continuing to have a record-breaking year,” Cox said. “Solid sales and a solid year of bringing on new agents.”

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