Europe's migrant crisis is making it harder for Carnival to sell cruises

For most people, a vacation is supposed to be a relaxing, light-hearted escape from the stresses of everyday life.

So it’s not surprising that vacationers are scaling back in a region where humanity of Europe’s migrant crisis is on full display.

Carnival, the world’s largest cruise line, addressed this with its quarterly earnings a few weeks ago. Here’s CFO David Bernstein during the conference call after earnings were reported:

“Overall, Continental Europe is probably more challenging. When you think about all of the economic difficulties and the geopolitical issues and the growing refugee concerns, that’s the area that has had the most challenges in terms of pricing for 2016, but we’ve had these challenges all year in 2015 to some extent and we are forecasting that we are going to get yield improvement for our EAA brands for 2015. So hopefully despite all these challenges, we’ll be able to do that in 2016 as well.”

The European part of the business is critical for the company because about 28% of its 2015 available cabin space is deployed to the region, the second highest after the Caribbean, according to its latest annual report.

The situation has slowed ticket buying in the region, said CEO Arnold Donald in the conference call, which has forced the company to drop prices in order to fill their cabins.

“By the time we get to December maybe those things won’t be the same, but today with some of the headwinds in Europe, geopolitical, macroeconomic malaise, the intense tension over there around the refugee situation, that has affected all travel, not just cruise but all travel,” said Donald. “So those things may still be present or they may wane between now and when we get to December, but we will give you full guidance then.”

About half of the company’s European operations are in the Mediterranean, which thousands of migrants have attempted to cross in the last few months resulting in a large number of drownings.

For what it’s worth, Carnival beat earnings per share expectations but came in lower on its revenue yields, or how much the company is making per available room, and EPS expectations for the fourth quarter.

The stock is down about 7% since the earnings report on September 21.

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