NEW YORK—Moody’s Investors Service has revised the outlook for the U.S. lodging and cruise industry to stable from positive reflecting the expectation adjusted EBITDA growth will slow in 2017, the ratings agency says in a report. The outlook reflects expectations for the fundamental business conditions for the next 12 to 18 months.
In full-year 2016, adjusted EBITDA will grow 8 percent to 10 percent, and 4 percent to 6 percent in 2017 for the 18 companies Moody’s rates. Through June 2016, lodging and cruise EBITDA increased 14 percent and is attributable to the strength of the cruise companies which have experienced robust earnings due to capacity expansion and low fuel prices.
“Growth in lodging EBITDA will slow down in the back half of 2016. This trend already started in the second quarter with year-overyear
Q2 lodging EBITDA growth slowing to 4.5 percent from 6.3 percent in the first quarter,” says Moody’s Senior Vice President Margaret Taylor.
The slowdown in lodging EBITDA growth has been driven by flat occupancy growth in 2016. Occupancy is forecast to fall -1 percent to flat in 2017, which will pressure Average Daily Room Rate (ADR) and Revenue Per Available Room (RevPAR) growth.
Cruise line EBITDA growth is also anticipated to slow in 2017, however, overall growth will remain healthy and outperform lodging.
The cruise industry has benefitted from 10 ocean ship launches in 2016 as well as low fuel prices which will accelerate EBITDA growth to 14 to 15 percent in 2016.
“We estimate that the ocean cruise capacity for Carnival Corporation, Royal Caribbean, and Norwegian Cruise Line will increase 2.5 percent in 2017 following a 6.4 percent increase in 2016. In addition, there will be less incremental benefit from lower fuel prices and foreign currency translation will continue to weigh on earnings,” Taylor says.
