Carnival Cruises 2008 Annual Report Download - page 18

18
We own a 40% interest in Grand Bahama Shipyard Ltd. ("GBSL"), which is the largest
cruise ship dry-dock repair facility in the world. Royal Caribbean Cruises Ltd. ("RCCL"),
one of our cruise competitors, also owns a 40% interest and the Grand Bahama Port Authority
owns 20%. We account for our investment using the equity method, and our total net
investment in and notes receivable from GBSL were $80 million at November 30, 2008. GBSL
only had outstanding debt to RCCL and us at November 30, 2008. This facility, located in
Freeport, Grand Bahama, has three dry-docks, which can handle ships up to 137,000 tons.
During 2008, RCCL and our brands had an aggregate of 13 ships serviced at this facility. In
addition, unaffiliated cruise ships and other types of ships were worked on at this
facility. GBSL generated total revenues of $133 million in 2008.
X. Cruise Pricing and Payment Terms
Each of our cruise brands publishes brochures with prices for the upcoming seasons.
Brochure prices vary by cruise line, by category of cabin, by ship, by season and by
itinerary. Brochure prices are regularly discounted through our early booking discount
programs and other promotions. The cruise ticket price typically includes accommodations,
meals, some beverages, and most onboard entertainment, such as the use of, or admission to,
a wide variety of activities and facilities, including a fully equipped casino, nightclubs,
theatrical shows, movies, parties, a disco, a jogging track, a health club, swimming pools,
sun decks, whirlpools and saunas. Our brands' payment terms generally require that a guest
pay a deposit to confirm their reservations with the balance due before the departure date,
although some of our European brands provide certain of their travel agents and tour
operators with credit terms even though these parties typically require the guest to pay for
the entire cruise before sailing.
If our guests do not pay a vacation protection premium for the ability to obtain a
refund if they cancel their cruise within a pre-defined period before sailing, then they are
subject to a cancellation fee, which we recognize in passenger ticket revenues upon
cancellation. For those guests who pay a vacation protection premium for the ability to
obtain a refund, they will receive all or a portion of their deposit back in accordance with
the terms of the program, while we will recognize this premium in other revenues.
Historically, our advance bookings have generally been taken from several months in
advance of the departure date for some contemporary brand sailings, to more than a year in
advance for some of our luxury and European brand sailings. Generally, the longer the
cruise itinerary the further in advance the bookings are made. This lead-time provides us
with more time to manage our prices in relation to demand for available cabins, with the
goal of achieving higher overall net revenue yields (see "Key Performance Non-GAAP Financial
Indicators" in our Management Discussion and Analysis of Financial Condition and Results of
Operations in Exhibit 13 to this Form 10-K). In addition, some of our fares such as Carnival
Cruise Lines' Supersaver fares, Costa's Pronto Price Savings fares, Holland America Line's
Early Savings and Mariner Savings fares and Princess' Early Booking Discounts, are designed
to encourage potential guests to book cruise reservations earlier. In addition, AIDA has a
"JustAIDA" booking program that allows guests to make a reservation two to three months
before sailing, but the exact cruise ship and specific itinerary are not determined by AIDA
until two weeks prior to sailing in order to help AIDA maximize their net revenue yields.
When a guest elects to purchase air transportation from us, both our revenues and
expenses generally increase by approximately the same amount. Air transportation prices can
vary by gateway and destination. Over the last several years about 15% of our guests
purchased air transportation from us, which relatively low amount we believe is partially a
result of having embarkation points close to our guests' homes and partially the result of
competitively priced air tickets sold by third parties.
In 2007, we introduced a fuel supplement across substantially all of our cruise brands,
which resulted in an additional fee being charged to the guests on these brands, commencing
for the most part with cruises departing in early 2008. This temporary fuel supplement,
which is included in cruise passenger ticket revenues, was introduced to partially offset a
portion of the very high fuel costs we had been experiencing, and was usually charged on a
daily basis, with established total maximums per passenger. As a result of the relatively
recent and large decreases in fuel prices, most of our brands no longer charge the fuel
supplement. However, if fuel prices increase to higher levels in the future, then we may
decide to re-instate fuel supplements.
XI. Onboard and Other Revenues
Onboard and other activities are provided either directly by us or by independent
concessionaires, from which we collect either a percentage of their revenues or a fee. We
earn onboard and other revenues from onboard activities and services not included in the
cruise ticket price consisting of, but not limited to, bar and some beverage sales, shore