UBS Analyst Assesses Recovery for Cruise Industry Yields

Robin Farley, a UBS financial analyst who focuses on the cruise industry, told investors in an update today that net yields for the cruise industry might need to rise 5 to 6.5 percent to get back to their previous peak.

Assuming that the recovery takes three years, Farley says the 2012-2014 net yield increases might be about 2 percent annually.

Other reveals in her note to investors? She says international passenger sourcing for both Carnival Corp. brands and Royal Caribbean Cruises Ltd. (RCCL) brands is yielding a lower onboard spend.

Passengers from Australia, China, Spain, Italy, France and the U.K., for example, often spend far less than North American guests on the casino, shop purchases, spa treatments, photos, and other onboard revenue items. Contemporary and premium brands, in particular, depend heavily on what guests spend onboard -- not just the cruise fare -- to achieve their financial goals.

So while onboard revenue is part of the mix, it's difficult to project because it varies so much by  passenger mix. Eliminating that onboard spend element, and taking into account ticket prices alone, "we note that [Carnival Corp.] has slightly more recovery room to peak in terms of ticket yields," Farley told her firm's investors.

She also says that total international passenger sourcing including Europe, Asia, Australia, and South America is targeted to be 50 percent for RCCL brands. For Carnival Corp., it's estimated to be 41 percent and that's only from its international passenger-sourcing brands.

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