Carnival's Profits Riding Rocky Waves

Carnival Corp, the company which operates Carnival Cruise Lines, recently faced a saddening disaster involving the crash of a $500+ million cruise ship, the Costa Concordia. The same time as the 'booking season' for spring and summer travelers. Executives of Carnival are now faced with the possibility sinking profits due to the overwhelmingly negative recent PR.

In an article related to the Carnival Corp.'s future profitability, the authors suggest that Carnival's management will bank on the steady stream of revenues that analysts expected irrespective of the recent misfortunes.

Although this event was over a very short period of time, it exposed Carnival to a lot of immediate stress including the loss of at least 25 customer's lives, a cruise ship worth $515 million, diminished consumer confidence, and extremely unfavorable publicity. Due to these stress factors, the Q1 profits fell, and many analysts are downgrading their outlooks on Carnival looking ahead. With all of these factors going against Carnival Corp., one would consider the company to be fighting an uphill battle. Nevertheless, Carnival Chairman, Mickey Arison decided to uphold the company's core values, and remained passionate about their business model.

To briefly expand on the Carnival business model; they deliver value to their customers in the form of reasonably priced vacation packages on elegant cruise ships for families with children and for couples. Their key resources include a giant fleet of cruise ships and many private islands at which only their ships can dock.

Coming back to Arison's confidence in the business, he suggested in a PR statement that customers continue booking through Carnival's cruise lines and not wait for discounts because the company will not be reassessing their pricing strategy to compensate for the Concordia crash. Although the executive management is working to compensate the families of the lost travelers, they are remaining confident in their current pricing strategy, and in current vacation purchasing trends to keep their business afloat. According to an article titled "How the Mighty Fall", some businesses tend to fail under stress due to not having the right people who fit the company's core values, and the right people being passionate about fulfilling their commitments to the company's work". In this case, Arison is doing a reasonable job of upholding his commitment to Carnival by remaining behind the business model and by allowing his accident relief team to take the lead on fixing the company's shortfalls while he remains behind the scenes as a strategist to bolster up their other brands.

Personally, I have been on a Carnival Cruise before, and absolutely enjoyed my time. While I do see where the company may have been at fault in the Concordia disaster, I do believe that a part of that crash was simply due to statistical impossibilities. In general, I would say Carnival's management is doing a good job mitigating their risks by implementing a task force to deal with issues like this one, along with promoting their other brands, while cleaning up the Concordia line. I would say that the company could do a better job of being more transparent with how they are dealing with the families who lost their loved ones in the crash.

What are your thoughts? Would you say that Carnival's executives are doing a good job of dealing with this business stress?