Carnival's Onboard Strategy Gains Steam: Is the Momentum Sustainable?

Carnival Corporation & plc CCL is seeing an encouraging lift in onboard revenues, highlighting a strategic shift, which is adding muscle to its bottom line. In the first quarter of fiscal 2025, onboard revenues grew approximately 10% year over year and accelerated from the prior quarter. The surge was instrumental in pushing net yields up 7.3% (on a constant currency basis), well ahead of the company’s guidance of 4.6%.This upside can be attributed to strong close-in demand and broad-based growth across all spending categories, including food and beverage, retail, casino and air services. The consistency across spending segments reflects a resilient consumer who continues to indulge once onboard, even amid broader macroeconomic uncertainties.With much of 2025 already booked and limited new capacity additions through 2026, onboard monetization is becoming increasingly important. Carnival’s strategy to enhance onboard experiences, ranging from specialty dining partnerships with chefs like Emeril Lagasse to tech upgrades for frictionless purchases, is gaining traction. Management emphasized that onboard trends in March remained strong. We believe that continued momentum into the second quarter of fiscal 2025 and beyond is likely.Key Competitors Challenging CCL GloballyRoyal Caribbean Cruises Ltd. RCL, a key rival to Carnival, continues to benefit from strong onboard revenue momentum, driven by higher guest participation in premium activities and experiences. Pre-cruise purchases have also exceeded historical levels, supported by robust direct-to-consumer demand across global markets. Royal Caribbean's agile sourcing model allows it to attract a diverse demographic mix from various geographies, ensuring a steady pipeline of quality demand.Royal Caribbean’s newest vessels, such as Star of the Seas and Celebrity Xcel, have been met with solid enthusiasm, fueling both strong pricing and load factors. While consumer spending has softened in some areas, leisure travel demand remains resilient.Norwegian Cruise Line Holdings Ltd. NCLH is advancing its onboard and island offerings to boost guest satisfaction and drive incremental revenues. The company recently unveiled a range of enhancements at its private island, Great Stirrup Cay, to elevate the Caribbean product and support stronger yields on itineraries at the destination.Additionally, Norwegian Cruise is seeing growing success through its digital transformation. The company reported solid adoption of its newly revamped NCL app. The app not only streamlines onboard experiences but is proving to be a significant pre-cruise revenue driver, enabling guests to book shore excursions and specialty dining in advance. These digital touchpoints allow Norwegian Cruise to personalize marketing efforts and increase pre-cruise engagement, helping it to lift onboard spend and foster stronger customer loyalty.CCL’s Price Performance, Valuation and EstimatesShares of Carnival have gained 7.1% in the past three months compared with the industry’s growth of 0.9%.Image Source: Zacks Investment ResearchFrom a valuation standpoint, CCL trades at a forward price-to-earnings ratio of 12.12X, significantly below the industry’s average of 18.21X.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for CCL’s fiscal 2025 and 2026 earnings implies a year-over-year uptick of 30.3% and 12.8%, respectively. The EPS estimates for fiscal 2025 have remained unchanged in the past 30 days.Image Source: Zacks Investment ResearchCCL stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Carnival Corporation (CCL): Free Stock Analysis Report Royal Caribbean Cruises Ltd. (RCL): Free Stock Analysis Report Norwegian Cruise Line Holdings Ltd. (NCLH): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks