Carnival’s Donald On The Challenges Of Alaska 2020

Open Jaw

During a recent earnings call with financial analysts, Carnival Corp. CEO Arnold Donald spoke of the most challenging market in North America for Carnival Corp: Alaska.

As Cruise Week reports, the region is being seen by many retailers as a big trouble point for 2020, with several saying that pricing is a bigger problem in 2020 than it even was in 2019. With that backdrop,  Donald's words were of particular interest to the trade heading into the biggest sales season of the year.

First, he addressed issues related to the pricing challenges. "In Alaska...the industry is in the process of absorbing the 10% capacity increase in 2020 on top of last year's 15% increase," he said.

Carnival Corp's capacity, specifically, is up nearly 9% in 2020, mainly because of Carnival Cruise Line and Cunard. Seabourn also has increased Alaska capacity.

"While growing and profitable with our scale, Alaska remains a year-to-year yield-growth challenge that we are working hard to address," Donald told the investment community.

He then spoke determinedly of proactive steps being taken: "We continue to focus on creating demand there, including some new approaches with our travel agent partners, as well as new consumer communications efforts specifically targeted to Alaska."

But as with the Caribbean, Donald expressed a wait-and-see attitude, hopeful but not overly so. For instance, in the Q & A portion of the earnings call, Donald said: "We've got very good initiatives and the key brands that are serving Alaska. We'll have to see how they play out." He added: "We're right before Wave."

The most visible initiative Carnival Corp. has taken in regards to Alaska, at least as concerns the trade, is the ‘Princess Best Sales Ever’ program, which was launched in DEC and continues through 29FEB. The timing of that launch, as well as Holland America Line's ‘View and Veranda’ promotion, which also launched in December, has given the trade time to acclimate to new sales strategies before the big Wave push beginning this week.

Cruise Week says it has been hearing a lot from the trade in recent months that demand for Alaska seems flat. When sharing 2020 booking numbers with Cruise Week, one experienced head of an agency group shared the decades-old adage, 'whenever Europe is strong Alaska struggles, and vice-versa,' adding it has generally, though not always, been that way since the late 1980s.

And Europe cruise sales from North America continue to be strong, particularly for Northern Europe. "Europe growth for 2020 is almost on par with last year at this point, and that's impressive because it's growth on top of growth," said the top source.

So it's key that the leading cruise lines in the Alaska market push hard to drive demand as well as employing aggressive promotions. In not so many words, Donald made it clear that we can expect to see those types of consumer initiatives for Alaska in the days ahead as Wave kicks in.

As for the big picture, Donald noted during the earnings call, "I don't want to make it sound like Alaska is a bad market, it's a great market. We make really good money there. The reason why capacity is going in is because it is a strong market with a lot of demand from guests. And we're doing everything to put us in a position [to] over time grow yield there along with growing the capacity."