Bad news, cruisers: The days of sailing on unusually uncrowded ships are coming to an end.
Cruise giant Carnival Corporation on Tuesday said the occupancy rate on the company's vessels had jumped to nearly 70% this month, up from 54% during the previous three months. And it's likely to go much higher in the coming months, the company's top executives suggested.
"We continue to expect that occupancy will build throughout 2022 and return to historical levels in 2023," Carnival Corporation CFO David Bernstein said Tuesday during a conference call with Wall Street analysts.
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Historically, most cruise ships operated by major cruise companies such as Carnival Corporation have sailed at occupancies close to 100%. The industry has traditionally operated on a business model that's built around managing bookings to be sure ships always are full.
But occupancy rates on cruise ships have been far below normal over the past year as the industry slowly bounces back from a months-long, COVID-19-related shutdown.
As TPG saw first hand while covering the restart of cruising over the past year, some ships initially sailed with just 20% or 30% of normal passenger loads.
Carnival Corporation and other major cruise companies such as Royal Caribbean Group and Norwegian Cruise Line Holdings initially capped the occupancy on ships as part of a strategy to reduce COVID-19 transmission between passengers. Cruise ship occupancy also has been low in part due to the hesitancy of some consumers to book cruises during the various waves of the COVID-19 pandemic.
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But with COVID-19 fading in many parts of the world, cruise companies have been allowing ships to sail more full. And consumers are becoming more confident in booking cruises.
Carnival Corporation is considered a bellwether for the cruise industry as it accounts for nearly half of all cruises taken worldwide. If it's seeing higher occupancies on ships this month, it's likely that other cruise companies are, too.
Carnival Corporation is the parent company of Carnival Cruise Line, Princess Cruises, Holland America, Seabourn and five other major brands.
While neither Royal Caribbean Group nor Norwegian Cruise Line Holdings have commented recently about cruise ship occupancy rates, executives at both companies in February said they expected occupancy rates to rise as the year goes on.
Royal Caribbean Group is the parent company of Royal Caribbean, Celebrity Cruises and Silversea Cruises, and a partial owner of Germany-based TUI Cruises and Hapag-Lloyd Cruises. Norwegian Cruise Line Holdings is the parent company of Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises.
During Tuesday's conference call with Wall Street analysts, Carnival Corporation CEO Arnold Donald noted that more than 40 sailings on the company's ships this month will sail with more than 100% occupancy — something possible when more than two people stay in some cabins.
Cruise companies consider a ship to be 100% occupied when two people are staying in every cabin. Most cabins on cruise ships have two main "berths," as cruise companies call bed spaces. But some cabins also have pull-down bunks or sofa beds that allow for more occupants.
Carnival Corporation held the conference call with Wall Street analysts on Monday in the wake of releasing its quarterly earnings.
Bernstein noted on the call that Carnival Corporation had expected higher occupancy levels during the three-month period that ended on Feb. 28. But the surge in cases of the omicron variant of COVID-19 led to last-minute cancellations by customers.
The company went into the quarter with 55% of available berths booked and ended the quarter at 54% occupancy -- meaning that, as the quarter went on, more people canceled sailings for the period than booked new trips.
"As a result of the omicron variant, we experienced an impact on bookings for near-term sailings, including higher cancellations resulting from an increase in pre-travel positive test results, challenges in the availability of timely pre-travel tests and [the] disruption that omicron caused on society during this time," Bernstein said.
That net decline in bookings is now reversing.
"Recent weekly booking volumes have been higher than at any point since the restart of guest cruise operations," Bernstein noted on the conference call.
Both Bernstein and Donald said they expected the surge in cruise bookings that normally takes place between January and March -- a period known as wave season in the industry -- would extend this year beyond March as consumers turn less cautious about travel.
"We believe we are well situated with our current second half 2022 book position given the recent improvement in booking volumes, coupled with closer-in booking patterns and our expectation for an extended wave season," Bernstein said.
The Carnival executives said they hoped to have all the company's ships back in operation by the summer. As of Monday, 64 of the company's ships, representing 75% of its fleet capacity, were in operation. That's up significantly from the previous three-month period ending on Feb. 28, when 60% of the company's fleet capacity was in operation.
During the three-month period before that, from September through November of 2021, just 47% of the company's fleet capacity was operating.
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