Carnival: higher revenue per cruise passenger and a focus on costs

So, is it all as easy as sipping a cocktail on the first-class deck? The reality is more complicated. One of the main concerns raised by analysts is that, as Carnival has several large ships, there is a risk it may not be able to fill them. The answer – as some experts point out – is that the group tackles the problem, first and foremost, by managing the booking curve. In other words: the company does not increase prices across the board, but raises them gradually over time. It sells a large proportion of its cabins well in advance at lower prices, and as occupancy rises, it increases the fare (except for last-minute bookings). In this way, average revenue tends to be maximised without the risk of ending up with empty cabins. Carnival also makes use of fleet segmentation. The group owns brands (such as Seabourn) that operate smaller, niche and upmarket vessels. This allows it to tap into different markets and balance risk. Finally – as noted – the cost of a cruise often remains competitive compared to a land-based holiday. Consequently, there is scope to utilise price leverage.

 The geopolitical issue

That said, however, it may be further argued that the global geopolitical context is a source of uncertainty. This scenario risks both dampening demand for cruises in general and limiting the routes that can be sailed. This is true, as various experts acknowledge. Nevertheless, firstly, the group’s diversified geographical presence allows it, for example, to redeploy ships should certain areas become problematic (such as the Middle East). Furthermore, flexibility in pricing allows Carnival to slow down price rises, focus on last-minute offers and slightly reduce margins, whilst still maintaining high occupancy rates on its ships.

Yes, the ships. In the short term, the group has not focused solely on building new ships. Rather, it has sought a renewal that is primarily qualitative (for example, through the refit of existing vessels). Then, from 2029 onwards, it will begin to take delivery of giant ‘cruise’ ships with a capacity of 8,000 passengers. In this regard, a delivery is scheduled for 2025. Meanwhile, the fourth and fifth Excel-class ships are due to be launched in 2027 and 2028. The programme is in line with the strategy of improving operational efficiency and reducing debt, which has been underway for some time. Carnival, like the rest of the sector, has been hit hard by the Covid-19 pandemic. In 2018–19, the financial year prior to the outbreak of the pandemic, the company’s GAAP net profit stood at 3 billion. In 2019–2020 and 2020–2021, by contrast, the group posted losses of 10.2 and 9.5 billion respectively. Gradually, the situation improved, leading up to 2022–2023, when the Miami-based group effectively broke even for the financial year (a loss of 0.07 billion under GAAP accounting). Against this backdrop, it is easy to see why the company has aggressively pursued efficiencies and cost savings. The effects of these cost-cutting measures are also evident in the figures for the first half of the 2024–2025 financial year, which ended on 31 May. That’s right! Operating expenses rose to 7.7 billion, approximately 150 million more than the 7.5 billion recorded in 2024, representing a 2 per cent increase. And yet – setting aside the one-off positive effect of the sale of one vessel in the North America segment and one in Europe – the cost trend remained contained, thanks in part to lower fuel costs and lower fuel consumption per Albd. Consequently, against the backdrop of an 8.5 per cent increase in revenue in the first half of the 2024–2025 financial year, profit margins have risen. The gross margin per Albd as at 31 May 2025 stood at $65.7, whilst a year earlier the figure had been lower, at $52.45. These figures clearly demonstrate that the combination of business expansion and cost-cutting measures is paying off.

 Debt dynamics

Is this trend also evident in the company’s financial structure? In general, again due to Covid, the company has seen its total debt soar – for the past financial year – to new heights. According to the Bloomberg terminal, this balance sheet item stood at 11.5 billion in 2018–2019. Then, in the following financial year, total debt rose to 23.4 billion dollars. The rise continued in 2020–2021 and 2021–2022, reaching 34.6 and 35.8 billion respectively. The peak occurred in the first quarter of 2022–2023. From then on – thanks to the group’s intervention, which, amongst other things, involved repayments amounting to several billion – the figure began to fall. So much so that, in the last quarter, the ratio of net debt to adjusted EBITDA stood at 3.7 times. This figure is still not particularly low, but it is nevertheless lower than the 4.1 times recorded by the company in the first quarter of 2024–2025. These efforts have also led to an improvement in Carnival’s credit rating. Moody’s, also in the first quarter of 2025, reinstated the company’s investment-grade rating (Ba2). Fitch and S&P, with ratings of BB+ Positive and BB+ Stable respectively, remain one notch lower, still in speculative-grade territory. That said, in the latest quarter, Carnival notes that it has, in any case, exceeded certain targets. These include an Adjusted ROIC (return on capital employed) of 12.6 per cent. This has helped to raise estimates for the full financial year. Net yields are expected to improve by around 5% compared with 2023–2024 (+4.7% in the previous estimate). Adjusted EBITDA and net profit, on the other hand, are estimated at around 6.9 and 2.69 billion respectively (6.7 and 2.49 were the figures given in the March guidance). Against this backdrop, the share price inevitably reacted positively on the stock market. On the day following the publication of the figures, Carnival – which is dual-listed in New York and London – rose by 6.9 per cent. This surge contributed to the share’s rally. Over the past year, the cruise line – according to Bloomberg – has risen by 91% (closing on 12 September 2025). The stock market trend – according to Seeking Alpha – has translated into the following multiples. The non-GAAP P/E ratio for 2024–2025 is 16.2, whilst the non-GAAP PEG ratio is 0.75 (compared with 1.79 for the benchmark sector). Finally, the price-to-sales ratio stands at 1.56.

Share price performance