From humble beginnings in 1972, when founder Ted Arison converted a freighter into a cruise liner, the line has gone on to become the industry leader, holding some 20% of the market.
And the company keeps sailing along. Since 1990, Carnival has added four megaliners with 2,000-plus berths, and six more ships of that size will bring the fleet to 12 by 1998.
Considering industry figures estimate just 2% to 6% of Americans have ever taken cruise vacations, demand can only grow, said one analyst.
"The market remains relatively untapped," said Michael Mueller, an analyst with Montgomery Securities, San Francisco. "So far, the industry demand growth has exceeded supply growth. So the new supply has in effect created its own demand."
The company has proven itself adept at quickly launching assaults on the competition, and it is on the land that future competitors lie. Las Vegas has proven itself a formidable land-locked foe. And Florida-where resort powerhouse Walt Disney Co. holds sway-is expected to rebound strongly from recent declines.
In January, Carnival launched its first salvo on the West Coast, positioning itself as the alternative to Las Vegas, with ads from TV agency McFarland & Drier, Miami.
The ads support the line's shift of the Holiday liner from a seven-day itinerary based out of Miami to Los Angeles, offering three- and four-day excursions. It joins the Jubilee, offering seven-day cruises.
The company's response to Las Vegas reflects the industry's growing awareness that competition today is coming more from land than sea. Further, the cruise business only has a 5% share of vacations where the traveler spends more than $1,000, said Sherri Spear, an analyst with Lehman Bros. in New York.
"Most cruise companies still see their greatest competition coming from land-based vacations, and less competition coming from each other," Ms. Spear said. "That's why so many analysts are bullish on the cruise line industry. They'd like to see them taking share away from land-based vacations, and not fighting with each other through pricing."
Though it's too soon to tell how Californians have reacted to the new ads, Wall Street historically has taken kindly to the performance of parent company Carnival Corp., which went public in 1987. Fourth-quarter 1994 net income rose 40% over the same period in 1993, to $70.1 million. Revenues for the period were $410.6 million, a 26% increase.
For the year, the company announced net income was up 20% to $381.8 million. Revenues for the year: $1.81 billion, up 16%.
A devalued Mexican peso, the current mild winter in the northern U.S. and even increased land-based competition haven't sullied the line's-or analysts'-bullish outlook. Still, the issue of land-based competition causes some reason for pause, Carnival Cruise Lines President Bob Dickinson said.
Carnival negotiated with Disney executives for more than a year about launching a line together, before deciding the program wouldn't work, he said. That leaves the two as competitors at sea as soon as 1998, when Disney expects to have a vessel ready.
Mr. Dickinson said he believes Carnival will benefit from Disney's planned entry into the cruise market by enticing more people to try cruising.
Carnival now operates the Fantasy, out of Port Canaveral, Fla., offering packages splitting time between Walt Disney World and a cruise.
If there is one potentially sour note, it is the industry's vulnerability to "macroeconomic" issues, including recessions or oil crises, Mr. Mueller said. While midpriced lines typically fare well in recessions, an economic slide could "put a damper on demand," and reduce Carnival's ability to raise prices.
Carnival Corp. Chairman/CEO Micky Arison, 45, is unfazed. "At times when people are most price-sensitive is when you're going to be most successful," he said. "We've proven ourselves in recession."
The company has fought back the specter of oil-related travel industry slides with its new line of vessels, which are more fuel efficient than many competitors, he said.
Analysts would like to see Carnival raise its fares from the average $200 per day patrons now pay, said Mr. Mueller, and the company has shown steady price increases over the past six quarters. But like many cruise lines, Carnival gives price breaks to early comers and last-minute buyers. And while the airlines are cutting back on commissions (AA, Feb. 27), Carnival is renowned for paying hefty fees to travel agents, who book more than 99% of the cabins, said Mr. Dickinson.
Profit margins of 21% leave the company in a position to bombard the competition with fare cuts, added Mr. Arison.
Using spokeswoman Kathie Lee Gifford since 1984, the line has successfully pitched to a wide target. On-board programs, such as Camp Carnival and baby-sitting, help draw the whole family. More than 100,000 children cruise with Carnival annually, Mr. Dickinson said.
In the 1970s, when the industry average cruiser was 65, Carnival began marketing its "fun ships," and successfully lowered the age of its average patron. Today, 35% of Carnival's travelers are over 55, with 30% under 35 and 40% between 35 and 55, he said.
One blemish on the company's float plan was the failed launch of the Fiesta Marina, a ship dedicated to serving the Spanish-language market. The ship's itinerary was discontinued in September 1994 due to lagging occupancy rates.
Another failure was the company's venture into what is now an archrival business: land-based resorts. The company bought the Crystal Palace resort and casino in the Bahamas in 1983, just as a recession hit the Northeast, a primary feeder market for the Caribbean destination. Carnival sold the property in 1994 after losses totaling about $250 million.
Nevertheless, Carnival stands poised to continue its success.
"Think about what they've accomplished," said Mr. Mueller. They "began leveraged, and then turned to a mass-market business, exploited it to build the most efficient business. They blew right past their competitors to the dominant position."