Re: Cruising strategies for hard times


"peter" <peters25@xxxxxxxxxxxx> wrote in message
news:C66E26F2.59438%peters25@xxxxxxxxxxxxxxx

You state that cruise lines are in "survival mode", but don't care about
sales or revenue? So how DO you know they are in survival mode? What is
your
definition of survival mode? Do you know that profit equals sales less
expenses?

Yes... but they can play a lot of scenarios when they calculate expenses.
And what's included in expenses? Like capital that you spent... how do you
capture that? It's money spent, but not really an expense item, per se.

Example. Let's say they spent $600 million in capital on a ship that was
delivered a year ago and you want to calculate the profit margin for
sailings on that ship. The spending for the ship took place over a 5 year
period. And then you depreciate it over 15 years.

So it's now in it's first year of sailing. Do you included any of the
capital you spent the past 5 years in the gross margin calculation? Do you
include the depreciation of the capital? Depreciation of the ship?

Or instead, did that capital get allocated against the ships that were
sailing the past 5 years? If you do that model, then if you have 4 new
ships under construction now, do you allocate any of that spending against
the ship that was just delivered? You would have to.

Or suppose you bought a new cruise division, and sold a division... how do
you allocate those costs over the multiple years?

Yes there are ways that all those costs get allocated over various years for
tax purposes, but it can make the gross margin for various aspects of the
corporation very "grey". Especially in a business where there are a lot of
changes going on.

--Tom


.

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