NEW YORK – Lingering images of passengers stranded at sea for days as toilets back up and air conditioners fail have been enough to keep vacationers away from Carnival Cruise Lines, even as the company continues to discount sailings.
The cruise industry has mostly rebounded from the economic downturn but Carnival Corp.’s namesake brand can’t seem to shake a spate of bad publicity from earlier this year when three ships suffered mechanical problems and fires.
That, along with ongoing geopolitical fears in the eastern Mediterranean, is why Carnival said Tuesday that bookings for the next three quarters are below last year’s pace, even with lower pricing. The world’s largest cruise company now expects revenue to drop 3 percent in 2013, worse than its prior forecast. Shares plunged more than 6 percent in morning trading.
Carnival has struggled to restore passengers’ confidence after the February breakdown of the Carnival Triumph, which stranded passengers for five days in the Gulf of Mexico. That was quickly followed by two other instances of ships having to be towed back to port. Dozens of future sailings were canceled as the company repaired those vessels.
To win back customers, Carnival announced in April a $300 million program to add backup generators, upgrade fire safety and improve engine rooms on all 24 of its ships. The move ensures the operation of safety equipment and services like plumbing, fresh water and elevators if the main generator fails. Then in June, the company announced that Micky Arison, who had been CEO since 1979 and is the son of Carnival co-founder Ted Arison, was being replaced.
Robin Diedrich, consumer discretionary analyst for Edward Jones, said Carnival’s problems earlier this year were certainly damaging for the brand and cruising in general. Many first time passengers stayed away from Carnival.
Ultimately people go back to their normal patterns, Diedrich said. It will take some time and work on Carnival’s part.