4 ms·

Icon of the seas, back of the envelop calculation: Revenue: 52 weeks of sailing x 5.6k passengers [1] x 1.8k $/week [2] ~= 525m $/year Costs: Interest [3] 160

by pintxo 2y ago

Icon of the seas, back of the envelop calculation: Revenue: 52 weeks of sailing x 5.6k passengers [1] x 1.8k $/week [2] ~= 525m $/year Costs: Interest [3] 160m $/year + Crew [4] 118m $/year + Hospitality [6] 200m $/year = 478m $/year Profit ~= 47m $/year or ~9% [1] https://en.wikipedia.org/wiki/List_of_largest_cruise_ships https://en.wikipedia.org/wiki/List_of_largest_cruise_ships [2] https://www.cruzely.com/heres-how-much-money-cruise-ships-make-off-every-passenger-infographic/ https://www.cruzely.com/heres-how-much-money-cruise-ships-ma... [3] 8% on 2b$ [4] Crew: 50k $/year * 2350 crew [5], just guessing the costs here, including all accomodation + living costs, probably still to high? [5] https://en.wikipedia.org/wiki/Icon_of_the_Seas https://en.wikipedia.org/wiki/Icon_of_the_Seas [6] Hospitality: 100 $/guest/day? = 52 * 7 * 100 * 5.6k = 200m $/year

ta1243 2y ago
You've got to factor in deprecation. If the vessel cost $2b and lasts 20 years you need to repay $200m a year to repay the amount over 20 years. However I suspect 8% would be far higher that the rate they'd get. You'd also have to include maintenence costs, and also the reduction in revenue as it gets older (people will presumably not pay as much to travel on an older ship than a newer one), or the refurb costs you'll need to offset. On the other hand inflation has to be factored in. At 2% that debt will reduce 30% over the period.
- lotsofpulp 2y ago
  I feel like it’s just easier to use the existing cruise companies’ public financials. It looks like 10% to 15% are the real world profit margins, but with quite a bit of volatility. https://www.macrotrends.net/stocks/charts/RCL/royal-caribbean-cruises/profit-margins https://www.macrotrends.net/stocks/charts/RCL/royal-caribbea... https://www.macrotrends.net/stocks/charts/CCL/carnival/profit-margins https://www.macrotrends.net/stocks/charts/CCL/carnival/profi... https://www.macrotrends.net/stocks/charts/NCLH/norwegian-cruise-line-holdings/profit-margins https://www.macrotrends.net/stocks/charts/NCLH/norwegian-cru...
  - onlyrealcuzzo 2y ago
    A cruise company is incentivised to say things like depreciation are less than they are, so the company's numbers look better than they actually are. Additionally, it's very rare for a company to own a ship for its entire lifetime. The way they calculate depreciation now is based on resale value. I wonder what happens to that in a world where interest rates AREN'T negative in real terms anymore...
    - lotsofpulp 2y ago
      How long does this supposed fraud take to show up? Carnival and Caribbean have been doing business for decades, and Norwegian has been public since 2011. Surely, it would have impacted the bottom line by now at at least one of those 3 businesses.
      - onlyrealcuzzo 2y ago
        > How long does this supposed fraud take to show up? Estimating things is non-trivial. It's not fraud for your depreciation estimate to be off by a few percentage points. Banks regularly set their loss provisions artificially low or high to smooth earnings.
        lotsofpulp 2y ago
        I don't understand the point you are trying to make. If the estimates are incorrect, then they will show up after decades of operating as a business, being realized via the sale price of the ships or repair costs or whatever. The profit margins reported in the 10-Ks seem like an an accurate estimate of what a big cruise company can expect to earn, based on the current best management practices and technology.
    - DiggyJohnson 2y ago
      Taking a boat to go on vacation seems like a stronger industry than you're making it out to be. These are huge companies with highly scrutinized finances and obvious capital expenses.
tssva 2y ago
The CEO of Royal Caribbean has stated that the new large ships such as Icon are cash flow positive at 35% occupancy vs 50% occupancy for previous generations. The larger ships also have additional revenue generating experiences onboard so it is likely the average revenue per passenger is higher than the current industry average.

by pintxo 2y ago

ta1243 2y ago

You've got to factor in deprecation. If the vessel cost $2b and lasts 20 years you need to repay $200m a year to repay the amount over 20 years. However I suspect 8% would be far higher that the rate they'd get. You'd also have to include maintenence costs, and also the reduction in revenue as it gets older (people will presumably not pay as much to travel on an older ship than a newer one), or the refurb costs you'll need to offset. On the other hand inflation has to be factored in. At 2% that debt will reduce 30% over the period.

lotsofpulp 2y ago
I feel like it’s just easier to use the existing cruise companies’ public financials. It looks like 10% to 15% are the real world profit margins, but with quite a bit of volatility. https://www.macrotrends.net/stocks/charts/RCL/royal-caribbean-cruises/profit-margins https://www.macrotrends.net/stocks/charts/RCL/royal-caribbea... https://www.macrotrends.net/stocks/charts/CCL/carnival/profit-margins https://www.macrotrends.net/stocks/charts/CCL/carnival/profi... https://www.macrotrends.net/stocks/charts/NCLH/norwegian-cruise-line-holdings/profit-margins https://www.macrotrends.net/stocks/charts/NCLH/norwegian-cru...
- onlyrealcuzzo 2y ago
  A cruise company is incentivised to say things like depreciation are less than they are, so the company's numbers look better than they actually are. Additionally, it's very rare for a company to own a ship for its entire lifetime. The way they calculate depreciation now is based on resale value. I wonder what happens to that in a world where interest rates AREN'T negative in real terms anymore...
  - lotsofpulp 2y ago
    How long does this supposed fraud take to show up? Carnival and Caribbean have been doing business for decades, and Norwegian has been public since 2011. Surely, it would have impacted the bottom line by now at at least one of those 3 businesses.
    - onlyrealcuzzo 2y ago
      > How long does this supposed fraud take to show up? Estimating things is non-trivial. It's not fraud for your depreciation estimate to be off by a few percentage points. Banks regularly set their loss provisions artificially low or high to smooth earnings.
      - lotsofpulp 2y ago
        I don't understand the point you are trying to make. If the estimates are incorrect, then they will show up after decades of operating as a business, being realized via the sale price of the ships or repair costs or whatever. The profit margins reported in the 10-Ks seem like an an accurate estimate of what a big cruise company can expect to earn, based on the current best management practices and technology.
  - DiggyJohnson 2y ago
    Taking a boat to go on vacation seems like a stronger industry than you're making it out to be. These are huge companies with highly scrutinized finances and obvious capital expenses.

tssva 2y ago

The CEO of Royal Caribbean has stated that the new large ships such as Icon are cash flow positive at 35% occupancy vs 50% occupancy for previous generations. The larger ships also have additional revenue generating experiences onboard so it is likely the average revenue per passenger is higher than the current industry average.