Randomly Noted

A good indicator of whether the economy is really recovering is the cruise industry. There aren’t too many more discretionary spend items than a ticket for a ride on a cruise ship. Carnival Cruise today reported that third quarter earnings rose 22%. The gains were partly fueled by lower costs but much of the gains came on revenue gains – the company’s North American boats saw a 10% increase in the latest quarter versus a year ago. And Europe saw a 1% rise.

Clearly, the company s seeing a rebound from a vicious pounding it took during the recession. But it is also clear that it needs promotions like the one above to convince people to pack their bags and head out for a cruise.

It sounds like there are far fewer people visiting places like Cinderella’s Castle.

Walt Disney Co. this afternoon reported strong third-quarter earnings, with a profit increase of 40%. But one part of the business that continued to show weakness was in the parks and resorts segments. Disney in part blamed the calendar – it noted that Easter was April 4, which would have pushed some of that business into the earlier quarter. But it is also worth noting that the Parks and Resorts business in the 2Q saw a 12% year-over-year decline, so, clearly it has more to do with fewer families travelling. Probably post-recession hangover.

The company did note that those who are travelling to the parks seem to be spending more money.

The U.S. housing market‘s still a mess, unemployment’s still around 10%, markets are jittery – but Carnival says it will hike summer-cruise prices. Carnival shares rose on today’s news that bookings so far this year are “at unprecedented levels.” What’s up? Two factors are in force, I believe: First and foremost, cruises are relatively cheap – a reflection of cruise companies slashing prices as the economic crisis set in more than a year ago. Indeed, “pricing hasn’t fully recovered to 2008 levels,” said Gerry Cahill, Carnival’s CEO. Secondly, people who want to give themselves a treat as the economy stabilizes are gravitating toward cruises as opposed to do-it-yourself vacations, knowing they’ll get a pretty good ride for their money. Think about it: you’re feeling financially insecure yet you want a nice holiday. Do you book your own flights, hotels and rental cars; pore over maps and guidebooks to make sure you take in all the tourist attractions; and check internet restaurant reviews to ensure you’re not paying up for miserable meals? Or do you go with an all-inclusive cruise package? It may not be everyone’s cup of tea – I know many, many people who swear they would never take a cruise – but it’s a fairly secure option in these still-insecure times. When you book a cruise, you know what you’re getting. Plan your own trip, and anything can happen. By the way, it will be worth monitoring whether Carnival’s price hikes stick, and people pay up as the summer months approach. Generally speaking, companies in many sectors cut prices during the recession. Some did so to grab market share on the theory that when the economy recovered they’d be able to hike prices and restore profit margins. This remains to be seen.

The management disarray at EasyJet is shameful and sad. The European budget airline was once a no-frills trend-setter. Now it’s a poster child for how not to run a company. As DJN colleague Kaveri Niththyanathan writes (here’s her story; and blog), EasyJet’s founder, Stelios Haji-Ioannou, appears to be a big part of the problem. If you’ve met Stelios, you’ll know he’s nothing less than a dynamo;  this was overwhelmingly positive when the airline was up-and-coming but has become a negative as the company matures. It’s a wonder EasyJet is still going strong, transporting 12.2% more passengers in November than a year earlier – compared with British Airways’ 3.4% decline in the same period. What EasyJet, its employees and its shareholders now need is for its founder and 15.5% owner to take a back seat and just enjoy the ride for a change.

Maybe it’s just a statement of how bad the hotel business has been over the past year. Marriott International reported earnings today and among the flood of numbers it released was revenue per available room. The company crowed: “Revenue per available across our North American system declined less than expected during the third quarter as leisure travelers responded to attractive promotions and great values in our hotels.”

You’d think the company narrowed its decline into the low single digits. Instead, it was around 19.3%. What was the number these guys were expecting? The discounting (along with the recession) that led to these declines is expected to continue, the company said, It sees priced declining another 5% through tis year.

At first blush, you wonder why anyone would want to own shares of a hotel company, especially one doing an initial public offering. The economy remains in recession,  and, travel and business spending are sharply lower.

And when smart buyers are looking to sell, does that make you a dumb buyer?

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A View Of The Rolling Hills, Meadows and Lakes Of The Eastern Townships

The Eastern Townships area of Quebec is known for many things – its food reminds some of Normandy, not only in its freshness but the wonderful dairy products, especially the cheese . The lakes and rolling countryside remind me of the New England yesteryear – when towns were not overcrowded and the waterways were not jammed with high testosterone boats (everyone had to outdo everyone with the biggest boats and biggest horsepower – size and loudness seemed to matter most).

The Eastern Townships have a little of everything for everyone. There is an abbey to visit, St. Benoit du Lac, where one can meditate during vespers at 5 p.m. each day – so peaceful listening to the Gregorian chants. And the monks make a very good blue cheese as well as delicious apple cider (hard cider). There are bicycle trails throughout the region. Parks for hiking. The people are friendly. The antique shops are many. Nice little dining finds as well as bakeries.

And the wine.

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Hospitality Properties (HPT) Stock Performance

It hasn’t been easy in the hotel business these days. Business travel is down sharply. So is leisure travel. Not a great recipe for highly leveraged companies. One, Extended Stay, fell into bankruptcy court this week because of a suffocating debt load. Another, which has more flexibility and has been prudently trying to manage its debt, is Hospitality Properties and it hopes to sell stock and use the proceeds to pay down debt. Shareholders of the REIT may not like the dilution the new offering of 15 million shares will cause (the REIT has 94 million shares outstanding).

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Pallmantur, the Spanish cruise company owned by Royal Caribbean, was all set to make a splash with a new boat and cruise itinerary aimed at the Mexican audience. The boat, the Pacific Dream, would leave from Acapulco with 1,900 passengers and make stops at Ixtapa, Manzanillo, Puerto Vallarta and Cabo San Lucas. The 7-day cruise was seen carrying 60,000 passengers this year alone after the initial voyage on May 10. But just a week or two before the launch date, news of swine flu in Mexico began to spread.

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Jitters about swine flu have slammed Asia’s stock markets today – especially airline and tourism-related stocks. European and U.S. stocks are likely to get pummeled (except for shares of  drug makers whose products combat swine flu.) The Mexican peso has fallen and so-called safe-haven currencies (yen, Swissie) have benefited. A few countries, including China and Thailand, have banned hog and pork product imports from Mexico and the U.S., even though health experts say swine flu isn’t transmitted via meat consumption.  Feed-related commodities have come under pressure. Asian airports are using a testing device to monitor travelers for fever; some airports are preparing to quarantine infected people. As of this writing, at least 103 people have died in Mexico from the flu, which occurs in pigs and in rare cases gets passed to humans; there are confirmed or suspected cases in the U.S., Canada, parts of Europe, Israel and New Zealand. Asians are recalling how the SARS epidemic overturned their lives in 2003; the World Health Organization believes the Severe Acute Respiratory Syndrome experience makes Asia better-prepared than the rest of the world to contend with a potential swine flu pandemic.  SARS, which killed 800 people, gave Asia “a badly needed lesson for surveillance and the right infection control mechanisms,” the AFP quotes WHO spokesman  Peter Cordingley as saying. His view is the H1N1 virus – also known as swine flu – seems “relatively benign” at this point but cautions it could spread and mutate, becoming more of a threat.