Something interesting my TA told me

[tecdavidt]

We ran into our TA this past weekend. It was the first time we had spoken since our March 20th cruise. We talked about the Magic moving to CA. She was angry they did it. She said CA cruises are hard to sell because the Caribbean cruises have so much more to offer as far as ports to visit. Interesting. She also said they need to build a third ship and replace the Magic in FL with that new ship and move the Magic to CA. She said the ships cruising the Caribbean get more wear and tear. It wouuld make since to position a brand new vessel in the Caribbean. Remember this is only her opinions.

It was her last comment that blew me away: it has been going around in the TA circles that ( ah, the old rumor mill) Disney is not happy the way the cruiseline has been performing buisiness wise as in profits!!! I couldn't believe that as well as she. She said Disney is the highest priced cruiseline in her class that includes Carnival, RCCL, Celebrity, NCL, Costa, and Princess. Both of us agreed that there is no way they aren't making money since the Disney cruises are selling out and they are the most expensive cruises.

So, have I missed something in the business finance pages about this? Have any of you heard about the unhappiness about performance financially by the DCL cruiseline? You read this board and I couldn't tell you how many threads have had the notion of a third or fourth ship. The repeat cruiser numbers are huge. DCL keeps raising prices and people pay. Any other TA's heard of this financial unhappiness? I always believed Disney struck gold when they decided to start a cruiseline. Any stockholders on this board? I thought moving the ship to CA was a good test market to see if a ship in CA would be worth it. Like I wrote, it blew me away. The fear that went through my mind was, OMG, what if they decide to get out of the cruise business.
Kathy

 

[WDWLVR]

Well I can't tell you how the company is doing financially, but I can tell you that when a new ship is built it will be built for the west coast not the caribbean.

The reason is simple. A west coast ship needs more indoor space like a covered pool. That is so they can cruise Alaska. I've been told that what is designed for the next ship will be a west coast ship.

Just because someone is a TA doesn't mean they really know. I think there are people on this board that could blow just about any TA out of the water with Disney knowledge.

 

[tstobb]

DCL financials are bundled in with the Parks & Recreation group and are not shown separatly on any of the fincial documents of the company.
The "original" new ship rumor is what you have stated - that DCL wanted the newer, larger ship for the Carribean since they could fill the current ships on a consistant basis and would send one of the existing ships to the west coast permanantly to sail the itinararies that the will be in 2005 which would not require any alterations or additional covered areas..

 

[ThreeCircles]

:thewave: Whoo hoo for new ships for Florida! :thewave:

But, send the Wonder to CA if they do move a ship. I wanna keep the Magic!

 

[ivanova]

other than some minor aesthetics, what's the difference between the Magic & Wonder???

 

[ThreeCircles]

Well, the Magic was the first ship and will probably always be the flagship for the cruiseline.

I guess I'm just partial to her because it's the only cruise ship I've ever been on. What can I say, I love the Disney Magic!!!

 

[Horace Horsecollar]

Originally posted by WDWLVR
Well I can't tell you how the company is doing financially, but I can tell you that when a new ship is built it will be built for the west coast not the caribbean.

The reason is simple. A west coast ship needs more indoor space like a covered pool. That is so they can cruise Alaska. I've been told that what is designed for the next ship will be a west coast ship.

It's common for cruise lines to move Caribbean cruise ships to Southern California. Earlier this year, Carnival moved the Carnival Pride to Long Beach for 7-night cruises and replaced her with the larger Carnival Glory at Port Canaveral. And later this year, Carnival will move the Paradise to Long Beach for 3- and 4-night cruises (regrettably ending her unique status as a large 100% non-smoking cruise ship).

Either Disney ship would be excellent for year-round Southern California departures. And by replacing the Magic or Wonder with a new ship at Port Canaveral, DCL would give previous DCL passengers a compelling new reason to book Port Canaveral departures.

Then there's the question of suitability for Alaska cruises. Actually, the Disney ships are as suitable for the Alaska market as most of the other ships operating there each summer. Alaska cruises operate during the summer, when the weather in coastal Alaska tends to be sunny and in the 60s and 70s. For the most part, ships operating in the Alaska market are sister ships of ships operating in the Caribbean. However, there are some ships, like the Radiance of the Seas, that really do have superior designs for Alaska, including significant glassed-in interior areas from which to view the scenery and a retractable roof over a pool. Chances are that DCL would like to offer such superior features for any DCL Alaska cruises.

My guess is that if DCL builds two new ships, the most likely utilization would be:

-- The Wonder would continue to offer 3- and 4-night cruises.

-- The Magic would move to Southern California year-round.

-- One new 90,000 GRT ship would replace the Magic for 7-night cruises out of Port Canaveral.

-- The other new 90,000 GRT ship would offer Alaska cruises during June, July, and August, two annual Panama Canal repositioning cruises, and Caribbean cruises the rest of the year.

Under the scenario above, DCL would add substantial new capacity in the Caribbean, while expanding into Southern California (year-round) and Alsaka (seasonally).

 

[makaylee]

Horace, has anyone ever told you you are chock full of information?

 

[Horace Horsecollar]

Originally posted by makaylee
Horace, has anyone ever told you you are chock full of information?

Thank you. But, in this case, I'm chock full of speculation.

 

[tstobb]

From the 2003 annual report:

"After celebrating its fifth anniversary last summer, Disney Cruise Line remains atop the family cruise category as the only floating vacation with something for everyone, including sumptuous dining, some of the most spacious accommodations on the open seas, and a broad range of dazzling, age-specific entertainment that only the dream-makers at Disney could create. Performance in 2003 matched record-setting results from 2002, as guests of all ages continued to discover that Disney Cruise Line and its two world-class vessels – Disney Magic and Disney Wonder – offer hassle-free vacations ideal for every member of the family.

In 2004, guests on Disney Cruise Line will enjoy expanded itineraries that will now include visits to Antigua, St. Lucia and San Juan, Puerto Rico, as well as new entertainment, new menus in every restaurant, and the line’s first-ever 10-night cruise."

The report has no mention of the cruise line in the financials section for 2003 but there is a note in the section "2002 vs 2001" that notes for that year, cruise line revenues were down by $24 million.

 

[Mboothby]

Well, I think ANY venue having to do with traveling has taken a big hit over the last few years, for obvious reasons. The travel industry in general has taken a hit and only this year, seems to be turning around. So, I don't think that anyone can really make a fair assessment right now, because things haven't been good for anyone. I think if it IS true that Disney was disappointed in their earnings, they probably had a right to be, given the financial climate in the travel industry over the last few years, but that doesn't mean they didn't realize WHY. It's so hard to piece together any form of the truth from things heard from a friend of a friend of a friend of a friend. I haven't heard any buzzings and I too find it difficult to believe when you see how many people jammed the lines on Wednesday to book passage for cruises NEXT SUMMER, that they barely knew anything about! I think it's amazing and a true testament to the reputation Disney Cruise Line has, that they could create such a frenzy over cruises that they've not even listed excursions for. I mean, we don't even know what to expect on board. Those sailing 7-Days might guess how their cruises will go, based on what's offered aboard the 7-day Eastern and Western, but those of us sailing on the 14-day have no idea WHAT they're going to do to entertain us for two weeks and yet we booked sight unseen! That says something about Disney.

 

[SINK]

Originally posted by Horace Horsecollar

Then there's the question of suitability for Alaska cruises. Actually, the Disney ships are as suitable for the Alaska market as most of the other ships operating there each summer. Alaska cruises operate during the summer, when the weather in coastal Alaska tends to be sunny and in the 60s and 70s.

Sorry, don't mean to start a debate, but have you tried to cruise in 60/70 weather. It's freezing cold. We have done the Alaskan cruise in the mid-60s and its cold, imagine trying to use the pool. We have just sailed out of San Francisco in Mid April and it was still cold (From SF to LA), Cabo was fine. We have also done a weekend trip from LA to Ensenada, and it was also freezing cold. I don't think that there were whole lot of people at the pools or out on the deck for those three west coast cruises we've taken.

 

[Drcell01]

I attended the shareholders meeting in Philadelphia earlier this year and I can tell you that DCL was not mentioned by anyone that I spoke with concerning profitability. Only the ABC networks and the Disney Stores seemed to be a topic of discussion under the heading "unprofitable entities".

 

[GenieDana]

I've cruised Alaska on HAL. Pools were not enclosed, so why is that a requirement for Alaska cruising? Heck, let them freeze over and ice skate ! (just kidding).

If you're going on the ship for the swim, an Alaska cruise is not for you - for that matter any cruise is not.

I agree with Horace, capacity can be absorbed in the Caribbean. RCCL, CCL, Princess, etc. are building megaships for that market. They are positioning their existing larger ships for the East Coast. Follow the money. His analysis makes sense.

 

[WDWLVR]

Horace,

As usual, your speculation makes a lot of sense. My comments were those of someone from Disney from our sailing last May. They talked about having more enclosed areas for viewing etc. Not just the pool, although many of the ships that sail into Alaska do have the pools that can be covered. It would make sense to do two new ships - one for Alaska/Caribbean and one new for the Caribbean with the Magic or Wonder moving out west. I could totally see that.

If, however, only one new ship is done I think the new one would move west. This is only my speculation.

 

[BoardwalkBabe]

After 9/11, the DCL was the only piece of Parks and Resorts that had steady earnings with only a small dip. The cruiseline is doing just fine and meeting its numbers -- the company would not even consider building another ship if this were not the case!

 

[mikeymars]

A few points:

First, DCL (as well as the other major Caribbean-focused lines) have gotten a "free ride" over the last few years, re: capacity utilization and profitability.

Prior to 9/11, non-Caribbean destinations accounted for over 65% of the total cruise market. That dropped dramatically after 9/11, with the Bahamas and Mexico in particular experiencing a surge in cruise visits as scores of ships were redelpoyed to locations closer to the U.S. mainland. Therefore, the fact Disney has had little problem filling ships over the last few years should come as no surprise; they have been offering limited inventory (only two ships) in the "hottest" market. Frankly, you had to be an idiot to lose money there in 2002 or 2003.

Secondly, while DCL has been successful in attracting new cruisers -- primarly families who want to add a cruise to a WDW trip -- it has been much less successful in attracting clients from the "core cruisers" market, e.g. the approximately 5% of U.S. households who repeatedly cruise.

Every travel source I've ever read that discusses cruise sales trends points out DCL is to some extent pigeonholed among these "core users" as a line primarily for a certain kind of family with children, specifically, those who who willing to pay a premium for the Disney brand affiliation. It does not generally appeal to: singles, retired empty nesters (a HUGE segment of the core market, and the ones who often want to cruise somewhere OTHER than the Caribbean) or "dinks" (dual-income-no-kids).

Third, no matter how well DCL is "differentiated," it is not immune from the impact of the endless massive additions to capacity that continue in the industry. You can't have firms like Carnival and RCCL adding 100,000-2000,00 tons of capacity per year without that putting huge pressure on prices, which impacts EVERYONE. All those extra cabins add inventory that INEVITABLY pushes prices down.

So what? Well, back when we first cruised DCL in 2002, the "premium" for our cat 6 compared to a similar cabin on Princess or Carnival was about 18% When we decided last month that we'd like to cruise again in March 2003, I started shopping, and quickly found the "DCL" premium is now somewhere in the range of 37%. It's not that Disney has gotten pricier -- it's that everyone else is getting a lot less expensive.

Will I - and most of the people here-- still pay the difference?

Sure.

But we aren not representative of the total cruise market, gang. Check out ANY general cruise board, and you'll quickly find scores of "sticker shock" posts about DCL, that inevitably end with the poster discussing how they decided to cruise on a competitor, who is preceived as offering the same general level of value for much, much less.

 

[Amberle3]

Originally posted by Drcell01
I attended the shareholders meeting in Philadelphia earlier this year and I can tell you that DCL was not mentioned by anyone that I spoke with concerning profitability. Only the ABC networks and the Disney Stores seemed to be a topic of discussion under the heading "unprofitable entities".

Ah, but in corporate-speak there's a big difference between not losing money, and making as much money as projected.

DCL is not making as much money as the Disney bigwigs had originally projected, due to any number of factors (the most likely of which is just unrealistic figures). So, using really really really small numbers just because I don't want to have to deal with the big ones:

If projected income is 5000
and expenditures are 3000
then they're expecting 2000 in profits.
If actual income is 5000 then they're making what they figured they would.

BUT!
If projected income is 10000
and expenditures are 3000
then they're expecting 7000 in profits.
If actual income is still 5000 then they're making 5000 less than they figured they would.

Still not LOSING money. But definitely not making as much as they had figured. It's still quite a viable division for them, and still quite profitable. And I think that in the last few year's they've become a little more realistic about the projected income from DCL. I think that in the beginning they really didn't realize exactly how much revenue they would be missing from the casino and drink sales.

 

[invaderzim]

To answer the previous question: The Magic and Wonder are identical in build, square footage and design. However, only difference is the interior theme and a restaurant. The fancy restaurant on The Magic is Lumiere's, on Wonder it is Titan's. And where as the Wonder has Ariel's statue in the grand foyer, the Magic has Mickey. Other than that, and the fact that the Magic has just been overhauled and the teen club was moved into the old ESPN stack, they are identical.

 

[goingbacksoon]

I don't think the ability to bring on your own drinks really cuts into profit as one might think. I know I can't make a DCL konk cooler in my stateroom with the measley supplies I have in there My guess is that the novelty of tropical drinks more than makes up for the loss due to people bringing their own libations on board. Have you ever seen someone at the deck parties with a cabin-made scotch on the rocks, or a G & T? Most people have a drink in the cool DCL glasses.

As far as no casino being an impediment, I think if DCL was able to lower prices by adding one then by all means! One could envision a casino area being built on the template of beat street/route 66, and not allowing anyone under 18 there, period. It would have to be towards the fore or aft of ship, but feasible nonetheless.

Now if they put on a casino but don't lower the fare, well then, maybe a little greed has set in with the Disney execs. Maybe with some lower fares, and a casino, DCL could tap both the "core" cruising market (retirees, "dinks", etc) as well as families who couldn't afford DCL before. Or better yet, it would eliminate the choice some are making now, whether to sail an RCCL/CCL/NCL cruise with a view cabin, or sail DCL with an inside cabin. People will pay a premium for the Disney branding if it's not too much more, but when it starts hitting the 30% or more, less people pay that premium and would rather cruise than not cruise at all.

goingbacksoon