Time for CRUZ ETF as Cruise Industry's Prices Surge?
As vacationers emerge into a post-pandemic travel world, cruises have made a spectacular comeback — and ticket prices are surging. Cruise operators such as Carnival CCL and Royal Caribbean RCL Cruises are setting some ticket prices higher than pre-pandemic levels and are indicating they may raise them further, even as they post pre-Covid profits. This trend puts the spotlight on Defiance Hotel, Airline, and Cruise ETF CRUZ.
Ticket Prices on the Rise
According to data from Cruise Critic, a cruise review site owned by Tripadvisor, the average price of a five-night cruise in the Caribbean for December of this year is $736, roughly 37% higher than the average price a year earlier. Compared to 2019, before the Covid-19 pandemic decimated the cruising industry, December ticket prices are up 43%, as quoted on CNBC.
Cruise Companies Report Record Highs
Carnival CEO Josh Weinstein said during a call with Wall Street analysts at the end of September that the company’s third-quarter net revenue per passenger per day reached a record high. The company’s booking volumes likewise hit an all-time high, pushing cruise occupancy and revenue beyond 2019 levels, he said.
Especially as costs of labor, food and fuel continue to rise, Carnival executives noted on the call, the company, which owns multiple major cruise brands, is “well-positioned to drive 2024 pricing higher.” A Carnival spokesperson declined to comment on the company’s specific future pricing actions but said in a statement to CNBC that the company has been able to deliver a value of 25% to 50% over “comparable land-based vacation alternatives.” Carnival sees “ample headroom” to close that gap, the spokesperson said.
Are High Prices Here to Stay?
Aaron Saunders, a senior editor at Cruise Critic, said part of what’s driving the price surge is the comparison to high airfares. As inflation surges, airfare tickets have reached sky-high prices, with international airfare up 26% from 2019, according to an August estimate by fare-tracking company Hopper.
With travelers facing higher costs across the broader sector, and considering cruises typically include additional amenities such as meals and entertainment, consumers are likely to gravitate in that direction, Saunders said.
Industry's Perspective
Truist Securities analyst Patrick Scholes said while rising oil prices are important to monitor for context for the cruise industry, there’s not enough of a correlation between that increase and the increase in cruise prices to explain the propped-up tickets.
“They’re raising prices naturally — fuel or no fuel, the demand is there for them to be raising prices,” Scholes said.
For now, the record-high ticket prices show no signs of slowing, according to Ashley Kosciolek, senior cruise writer at The Points Guy. Kosciolek noted that the industry is also seeing higher prices for beverage packages and add-on amenities that used to be included in fares, the CNBC article highlighted.
CRUZ ETF in Focus
The underlying BlueStar Global Hotels, Airlines, and Cruises Index is a rules-based index that consists of globally-listed stocks of companies that derive at least 50% of their revenues from the passenger airline, hotel and resort, or cruise industries. Royal Caribbean (7.97%), Marriott (7.96%) and Hilton (7.54%) hold the top three spots in the fund. The fund charges 45 bps in fees.
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)
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Carnival Corporation (CCL) : Free Stock Analysis Report
Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
Defiance Hotel, Airline, and Cruise ETF (CRUZ): ETF Research Reports
