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Cruise News for the Corporate Travel Professional

October 2009 Edition

Royal Caribbean Reports Drop in Third Quarter Profits

“Like many other travel companies, we saw more strength than we expected during our peak season but have been experiencing more pricing pressure on some of our traditionally softer fall season sailings,” said Richard Fain, RCCL’s chairman and CEO. “Overall though, the business environment is largely unchanged and stable. We expect the yield deficit to continue to improve in the fourth quarter and we remain optimistic that 2010 will bring year-over-year yield improvement.”

RCCL’s revenues were $1.8 billion, versus $2.1 billion in the third quarter of 2008. Net yields decreased 16.5 percent from the prior year or 14.5 percent after adjusting for year-over-year changes in currency. Net yields improved approximately 1.5 percentage points from the company’s previous guidance, mainly as a result of the strength of close-in bookings.

As RCCL announced during the second quarter, the H1N1 virus had a negative impact on yields of approximately two percentage points during the third quarter. The company reported that booking volume since mid-September was up about 40 percent compared to same period last year, with favorable comparison for cruises departing both in the fourth quarter and next year.

“While the pricing environment is still not what we’d like it to be, we’re pleased to see solid growth in our order book and a rapidly diminishing gap in year-over-year booked volume comparisons,” said Brian Rice, executive vice president and chief financial officer. The company expects fourth quarter net yields to decline approximately 7 to 8 percent, slightly worse than its previous forecast of down mid-single digits. “During the fourth quarter, we historically source a disproportionate number of our guests from Florida,” said Rice. “As a consequence of the weaker economy in the state, we do not anticipate the same strength of close-in bookings in the fourth quarter as we saw in the third quarter.”

RCCL noted that its new ships, Royal Caribbean International’s Oasis of the Seas and Celebrity Cruises’ Solstice-class vessels, Celebrity Solstice and Celebrity Equinox, continue to command significant premiums and volumes. Oasis of the Seas will enter service on Dec. 1; Celebrity Solstice and Celebrity Equinox are already in service, with Celebrity Eclipse debuting in April. RCCL also affirmed its earlier outlook for year-over-year improvements in net revenue yields in the first quarter and for the full year of 2010.

Based on current ship orders, projected capital expenditures for 2009, 2010, 2011 and 2012 are unchanged at $2.1 billion, $2.2 billion, $1 billion, and $1 billion, respectively. Capacity increases for the same four years are 5.1 percent, 11.6 percent, 8.8 percent and 2.7 percent, respectively.

The company took delivery of Oasis of the Seas on Oct. 28. The vessel was funded with a 12-year amortizing unsecured facility that matures in 2021. Oasis of the Seas’ launch continues to be one of the most widely anticipated and reported vessel deliveries of all time and the company expects an acceleration of media coverage and buzz when the vessel arrives in Florida on Nov. 11.

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