Feb. 14, 2013 at 2:01 PM ET
Based on accounts by some passengers of fetid conditions aboard the stricken Carnival cruise liner Triumph, cleaning up the vessel is likely to take a lot of work. The job pales in comparison, though, to the all-hands-on-deck effort it will take to scrub the tarnish off the company’s reputation.
“With something this big, when it happens, it gets the enormous press coverage,” Peter G. Whelpton, a cruise industry consultant, said. “It definitely will affect Carnival… I think they’ll see a short-term dip in their bookings.”
The Triumph, being pulled by a trio of tugboats, is scheduled to limp into Mobile, Ala., sometime Thursday night. Its stranding is expensive for Carnival already.
The company canceled a total of 14 future trips during what would normally be the industry’s high season in the United States. Yesterday, Carnival announced that the cost of these disruptions and repairs will drive down earnings per share by between eight and 10 cents for the first half of the company’s fiscal year.
In all likelihood, the cost will be higher because that calculation doesn’t factor in the business Carnival may lose because of the damage its reputation has suffered, said Morningstar analyst Jaime Katz.
“My guess is that there will be a few more pennies down the road thanks to the publicity,” she said. “It’s definitely going to cause a little bit of a PR headache for them.”
Carnival’s public image has hit some stormy seas over the past few years. An engine room fire that crippled the Carnival Splendor in 2010 and last year’s disastrous sinking of the Costa Concordia (a Carnival-owned line) were followed by another fire last March, this time aboard the Costa Allegra in the Indian Ocean.
Americans make up almost two-thirds of cruise travelers around the world, according to the Cruise Lines International Association. Luckily for Carnival, only about one in five people associated the Concordia disaster with its parent company, according to Ipsos Loyalty, a division of market research firm Ipsos.
“The public’s memory is short,” Whelpton said, especially when an incident takes place a continent away.
The plight of the Triumph, on the other hand, is playing out in real time via anxious text messages and Tweets sent by passengers on their cell phones. One passenger told TODAY on Thursday that food was scarce, water was in the cabins and toilet facilities were virtually nonexistent, comparing the squalid conditions on the stranded ship to those inside the Superdome in the wake of Hurricane Katrina.
Carnival has said that the crews are doing the best they can and it has disputed passenger accounts.
“Every decision we’ve made since Sunday morning is to ensure the safety of our guests and get them home as quickly as possible,’’ Gerry Cahill, CEO of Carnival Cruise Lines, said in a news conference.
It has also confirmed that fewer than two dozen public toilets are working for the 4,000 people on board.
Of the 3,143 passengers aboard, most are Americans, which Whelpton said increases interest in the story.
“This seems to be a really high number of people that are affected,” said Andrea Stokes, vice president in the travel and leisure group at Ipsos Loyalty. "This is not good to have this many people affected.”
Another factor that will keep the incident in people’s minds for a while is plans by the National Transportation Safety Board, U.S. Coast Guard and the Bahamas Maritime Authority (where the vessel is flagged) to investigate the fire.
Some critics have charged in the past that the cruise industry is too lightly regulated, since the multinational nature of the business means that carriers often don’t need to comply with domestic rules and requirements on labor, safety and other issues.
Carnival’s latest incident comes at an otherwise positive time for the cruise industry. Bookings on CLIA member vessels rose from 16.3 million in 2011 to an estimated 17.2 million last year. “CLIA member lines have experienced an average annual passenger growth rate of 7.2 percent since 1980,” the group said in a report this month.
Whelpton said the cruise industry tends to be “recession-proof,” and Carnival still has plenty of ardent fans. Skirmishes played out on its Facebook page as loyalists defended the cruise line, suggesting that passengers on board the stricken vessel were exaggerating the severity of the conditions so they could angle for a bigger payout (passengers are already getting $500 in addition to refunds and a discount on a future cruise).
While this subset of customers won’t abandon it, less brand-loyal cruisers might be more likely to drift away from Carnival for their next vacation. Travelers who have never cruised — a “key market” for the industry, according to Stokes — are most likely to be put off the idea of cruising altogether.
“Where this might have a negative effect more would be on people who have never cruised,” she said.