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Cruise industry woes not affecting Disney, CEO says
March 2, 2012 / 8:50 PM / 6 years ago

Cruise industry woes not affecting Disney, CEO says

March 2 (Reuters) - As Disney prepares to launch its fourth cruise ship following several recent disasters that have rocked the industry, and other cruise lines jump to slash fares, the company’s chief executive officer never considered cutting rates for passengers on its new Disney Fantasy ship, scheduled to sail on March 31.

“The opportunity we see isn’t in grabbing market share by pricing. We have a brand that means quality and service for family entertainment,” Chief Executive Bob Iger said from a Disney Fantasy stateroom an hour before its March 1 christening in New York City.

Disney will charge the same $959 per person starting price for double occupancy that it had planned a year ago for the 4,000-passenger ship that welcomes guests with a Minnie Mouse statue and an atrium highlighted with Disney characters carved into its stone walls. The ship features an AquaDuck water park, a Buccaneer Blast fireworks show, and the Bibbidi Bobbidi Boutique -- a beauty salon that offers princess makeovers for girls.

The Fantasy’s first voyage is a seven-day Caribbean cruise starting March 31.

Even as cruise lines deal with nervous passengers, especially after the Costa Concordia capsized off Italy on Jan. 13, Disney’s ships will be 74 percent filled.

More important, the cruise line business boasts a return on investment “in the high to mid teens,” said Iger, and will continue to do so even after putting the new boat into service.

Advance bookings, Iger said, were “even higher” than the ships’ current capacity.

“We really don’t think of ourselves as being in the cruise business. We’re in the family entertainment business,” said Tom Staggs, chairman of Walt Disney Parks and Resorts. Staggs said he was confident in Disney’s security in the wake of recent reports that 22 passengers on a Carnival Cruise Lines ship were robbed while on an excursion to the Mexican resort city of Puerto Vallarta.

The robberies followed the Jan. 13 disaster on the Italian ship Costa Concordia that killed at least 25, and the fire that broke out on the Costa Allegra on Feb. 25 that stranded more than 1,000 on board for three days.

The level of return forecast by Iger “sounds achievable,” said Lazard Capital Markets analyst Barton Crockett, who estimated Disney spent about $950 million to build each of its two newest ships: the Disney Dream which launched last year and the new Disney Fantasy.

While the cruise business is a relatively small part of Disney’s global media and parks business, the two new ships should help drive higher operating profit this year, Crockett said. He estimates about 19 percent of the company’s operating profit in the current fiscal year will come from the parks division, with 9 percent of that from Disney’s entire fleet of four cruise ships.

“They have really carved out a great niche in the cruise business, a premium cruise experience. It’s a great way to leverage the Disney brand,” Crockett said.

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