Carnival is anticipated to report strong revenue growth in the second quarter as new and younger clients spend on fresh experiences like cruising, unaffected by high inflation.

While Americans have reduced their spending on expensive, non-essential items due to rising prices, the prolonged confinement to their houses during the pandemic has piqued their interest in outdoor activities.

J.P. Morgan data show that consumer spending on services, such as cruises and flights, has increased by 80 basis points from a year ago, while consumer spending on products, such as clothing and footwear, has decreased by 230 basis points.

According to J.P. Morgan analysts, who raised the rating on Carnival stock to “overweight” last week, millennials (born between 1981 and 1996) and GenX (born between 1965 and 1981) have reached their peak earning years and are fueling multi-generational travel by spending on cruises and bringing their families along.

The stock of Carnival was upgraded last week by J.P. Morgan and Bank of America analysts, who noted that reservations for the whole cruise sector have surpassed record highs and that cancellation rates have not significantly increased.

According to a research from the Cruise Lines International Association, a younger consumer base is contributing to this demand, with 88% of millennial and 86% of GenX travellers who have previously taken a cruise wanting to do so again.

“Given (cruise) is a vastly under-penetrated travel product … more marketing instead of price cuts drives growth in new-to-cruise, which has a reasonably high conversion rate to repeat-cruisers,” Barclays analyst Brandt Montour said.

(Adapted from Investing.com)