No Consumer Recovery Just Yet, Royal Caribbean CEO Says
By Kelly Nolan, Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Royal Caribbean Cruises Ltd. (RCL) Chairman and Chief
Executive Richard Fain expects an eventual consumer recovery, but he says his
company hasn't seen it come to fruition yet.
"The good news is it's not getting any worse," Fain said in an interview with
Dow Jones Newswires. "We are anxious to see the upturn, but we haven't seen it
yet."
The comments come after the second-largest cruise ship operator by market
share behind Carnival Corp. (CCL) reported third-quarter earnings Tuesday that
beat company expectations, helped by last-minute bookings. The company's
earnings fell 44% in the third quarter, as pricing remained soft amid a
prolonged travel industry slump.
However, Royal Caribbean projected worse-than-expected earnings and yield
results--the industry's measure of ticket pricing and onboard spending--for the
current quarter.
Royal Caribbean shares closed Tuesday down 4.5% to $19.75. So far this year,
the stock has gained about 44%.
Amid a tough economy, cruise companies have had to discount trips
significantly to attract skittish consumers, who are generally waiting until
closer to sail date to book travel. While prices have improved sequentially from
a steep drop off last fall, they're still generally catching up to prior levels.
"We're giving people more of a good deal than I would like," Fain said.
That said, Royal Caribbean's chief executive sees some reasons to be
encouraged. While onboard spending is down, consumers are still making
purchases, especially where they see bargains, he said, and ships are also
sailing full, given the discounts.
There's also been some anecdotal evidence that people may be starting to book
trips farther in advance, but it's too early to say that with any decision, Fain
added.
"Reading between the tea leaves... I'd say any significant improvement in
consumer sentiment or spending, we're poised to benefit quickly," Fain said.
Looking ahead, Fain is also excited about the launch of the world's largest
passenger cruise ship, Oasis of the Seas, set to launch Dec. 1. Advance bookings
for the ship, which has a capacity of 5,400 guests, have been strong, the
company has said.
New ships like Oasis generally command a pricing premium, which should help
Royal Caribbean next year, as bookings also tend to stay healthy during a debut
period, analysts say.
Tuesday, Royal Caribbean reiterated its expectation that net yields should
improve for the first quarter and the full year 2010, in part due to the success
it expects for ships like Oasis.
Navigating the pricing environment should be easier next year, too, Fain said.
Last fall, "we were in unchartered waters," Fain said. "And when you're in
unchartered waters, it's hard to plot the most efficient course. Now we have a
lot more experience and we're much better able to chart a more effective
course."
-By Kelly Nolan, Dow Jones Newswires; 212-416-2167; kelly.nolan@dowjones.com
(END) Dow Jones Newswires
11-03-091923ET
Copyright (c) 2009 Dow Jones & Company, Inc.
|