Average lower berth days
Average lower berth day (or ALBD) is a standard measure of passenger capacity. It’s calculated by multiplying passenger capacity by the ship’s revenue-producing operating days in the period. ALBD assumes that each cabin that’s offered for sale accommodates two passengers. For 4Q15, ALBD rose by 2% to 19.6 million passengers. This is in keeping with the rising trend in the last four quarters.
Occupancy is a measure of capacity utilization. Like ALBD, the occupancy calculation also assumes that each cabin that’s offered for sale accommodates two passengers. Occupancy that’s more than 100% indicates that more than two passengers occupied cabins during the period.
Occupancy rose from 101.9% in 4Q14 to 102.5% in 4Q15. Occupancy has been improving for the last four quarters.
Net revenue yield
This is an important metric used in the cruise industry to measure a company’s revenue performance. It’s also used for revenue management purposes. It’s calculated as net cruise revenue divided by ALBD. Net cruise revenue is considered more appropriate to measure performance after deducting variable costs such as travel agent commissions, the cost of air transportation, and certain other variable costs related to onboard and other services from gross revenue.
Net revenue yield rose by 4.1% in constant currency terms. This was higher than the company’s guidance of 3% growth.
Carnival’s (CCL) competitors include Royal Caribbean Cruises (RCL) and Norwegian Cruise Line (NCLH). Carnival (CCL) forms the sixth largest holding of ~5% in the PowerShares Dynamic Leisure and Entertainment Portfolio (PEJ). It also forms 3.9% of the WBI Large Cap Tactical Value Shares (WBIF) and 4.0% of the WBI Large Cap Tactical Select Shares ETF (WBIL).
Next, we’ll look at future growth drivers for the company.