Royal Caribbean Cruises’ Chairman and CEO Richard Fain said on this morning’s earnings call that he is confident there will be no significant long-term industry impact from the Costa Concordia incident. While reservations dropped as much as 20 percent immediately after the incident, new reservations are now running behind in the mid-teens, but each day is showing improvement. Fain said the North American market was recovering faster than Europe, which he attributed to European markets’ proximity to the incident, more media coverage and weaker economies.
Prior to the Concordia incident, bookings were running 5 percent ahead of last year and at higher prices.
Fain described the level of uncertainty going into Q2 and Q3 as high. Hence, the earnings forecast for the year has a wide range – from $1.90 to $2.30.
Royal Caribbean used the call to reiterate its broader deployment strategy which may be serve to redirect marketing and sales to more robust markets. Adam Goldstein, CEO and president of the Royal Caribbean International brand said that in recent years, the brand has sourced 75 percent of the passengers for its European cruises from outside of the U.S. However, if the U.S. continues to recover faster than Europe, the brand can turn back to the U.S.to generate more passengers (for its European cruises), he said.
There will be a deployment shift in 2012, with the two main brands, Royal Caribbean and Celebrity, reducing capacity in Europe slightly and shifting from the Eastern Mediterranean to Northern Europe. In addition, both brands are adding more capacity in Australia and New Zealand, and Royal Caribbean in China with the Voyager of the Seas.
Looking forward, Brian Rice, executive vice president and CFO, said that ticket yields in the Caribbean, the Baltic and Alaska were strong, but weaker in the Mediterranean, especially the Eastern Mediterranean.
Demand is still in a state of fluctuation, he added. So far, the Royal Caribbean brands have maintained pre-Concordia pricing while continuing to assess the demand environment.