MISSION INTANGIBLE

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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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Carnival Corp: Executive shore leave

C. HUYGENS - Thursday, June 27, 2013
Carnival Corporation, the vacation experience company, as been having a bad run of shows. Eighteen months ago, a ship in its Costa Crociere family ran aground with loss of life. Last week, that company's President, Gianni Onorato, left the company with immediate effect to "pursue a new career direction."

In February of this year, a ship in the parent company's portfolio lost power and drifted in the Gulf of Mexico for a few days. The rescue by by the US Navy and Coast Guard made for excellent TV fodder.

Passengers from both the Costa Concordia and the Carnival Triumph are unlikely to recommend the product to their friends, and the proof is that bookings for this year have fallen behind 2012 levels, even as its cruise fares have moved lower in a bid to win back wary travelers. Bloomberg reported that "Some three-night Carnival cruises are selling from prices as low as $209. Five nights? Those have sold for as little as $249. A seven-night Caribbean cruise in August? Yours for $369, if you don’t mind an interior cabin. In April, as Carnival desperately sought to restore sales from the Triumph debacle, some four-night cruises from Miami were being sold for a mere $149."

This week, Carnival's CEO and Chairman surrendered his operating executive title. Director Arnold Donald, a longtime Monsanto executive and Carnival board member, will take over as chief executive from Micky Arison, who will remain board chairman. Compared to the fate of most CEOs who've had to walk the plank after operational failures and subsequent reputational crises, it's not a bad outcome.

Turning to the Steel City Re reputational value metrics, updated since our last visit of Carnival Corp (CCL) in January 2012, the company's CRR, a measure of its relative Reputational Premium, is hanging on the the top quartile in its peer group of 39 companies in the Hotels/Resorts/Cruise Lines sector. How so? Well, it's all relative. As Bloomberg reported, the entire industry is having issues this year.

It’s been a choppy few months for cruise ship operators. Memorial University of Newfoundland professor Ross Klein, who studies the industry and is the publisher of CruiseJunkie.com, collected reports of 31 incidents on cruise ships in the first three months of 2013, finding more ships run aground and more propulsion problems than in all of 2012. (To be fair, there were far fewer collisions; Klein’s data are self-reported by cruisers.)


The rash of incidents helps explain why the median sector reputational value volatility, Current RVM volatility in the chart below or Consensus Trend, was hovering around 5% for the better part of this year. 7% is a threshold value for major market capitalization movements.




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