Royal Caribbean Q3 Numbers

Royal Caribbean Cruises (RCCL) has reported net income of $53.1 million, or $0.83 per share, on revenues of $366.2 million for the third quarter ended Sept. 30, 1996, compared to net income of $49.7 million, or $0.78 per share, on revenues of $338.1 million for the third quarter of 1995.

RCCL posted 1,593,716 passenger days for a load factor of 103.8 percent for the three-month period, compared to 1,458,911 passenger days and a load factor of 105.4 percent for the same period last year.

Nine Months

For the nine-month period ended Sept. 30, RCCL reported net income of $124.1 million, or $1.95 per share, on revenues of $1.038 billion, compared to net income of $132.5 million, or $2.09 per share, on revenues of $894.1 million for the first nine months of last year.

Included in the 1996 results is a charge of $2.0 million for expenses incurred in evaluating a potential transaction. Net income for the first nine months of 1995 included a $19.2 million gain on the sale of a ship.

According to RCCL, "On a comparable basis before the charge and gain on the ship sale, the nine­ month period earnings were $126.1 million or $1.98 per share in 1996, compared to $113.4 million or $1.80 per share in 1995.

"We were pleased with the results of the third quarter," said Richard Fain, Chairman and CEO of RCCL. "They were influenced with an increasingly competitive marketplace toward the end of the third quarter, which we believe will extend through the fall."

In the fourth quarter, RCCL will post a gain of approximately $10 million from the sale of the Song of Norway and will introduce the third of the Vision class vessels, the Grandeur of the Seas.

In addition, in December, the Grandeur of the Seas will assume the sailing program of the Sovereign of the Seas which assumes the three- and four-day program of the Nordic Empress which in turn launches new three- and four-day service service from San Juan.

"The Nordic Empress was the first ship designed for the three- and four-day market," Fain said. "She has helped transform that market to attract new and better tonnage.

"She has been going gangbusters out of Miami, and we hope to do the same out of San Juan; bookings are quite good," Fain added.

Fain also explained that the Sovereign of the Seas will undergo major modifications before entering three­ and four-day service, including "the largest facilities for children on any ship afloat." More than 15,000 square feet of space will be devoted to children.

RCCL is also searching for a senior executive to replace Rod McLeod who left abruptly last summer. He was Executive Vice President of Marketing, Sales and Passenger Services. "But we are in no rush," Fain said. " We have a good team of experienced executives running the company."

Project Eagle

Asked about the next generation of RCCL ships, Fain would not say much, but emphasized that "bigger is not necessarily better."

"In the past, we have considered a post Panamax­ sized ship," Fain said, noting that at that time, the size did not service RCCL's purpose. Now, however, the scenario may have changed, as Fain said "Now we think we can use that size."

"But we need to do more than just build bigger," Fain said. "We must also build better."

"Our underlying philosophy, however, is to build appropriate to our market," Fain underscored.

Meanwhile, sources have suggested a new generation RCCL ship will be 115,000 tons, with a maximum passenger capacity in the 4,000 range. Fincantieri is said to be at the top of the short list of builders.


Fain said that RCCL's megabrand concept - that is, offering different length cruises on a variety of ships in different parts of the world, but under the same brand name - is working well. "People know there is an RCCL product they like and can trust," Fain said, "whether in the Caribbean or in Alaska."

Fain would not comment on whether or not RCCL is still looking for a partner in Europe, after the talks with Costa Crociere were terminated, but said that "we have been quite pleased with our own growth."

"Our growth is internally generated," Fain emphasized, also shrugging off rumors that RCCL may be looking at acquisitions in the North American market.

Industry Focus

Meanwhile, Fain said he sees dramatic changes in the distribution system, but not direct bookings. Instead, he sees a dichotomy developing between the travel agents who will sell a lot of cruises and those who sell less.

He also said that RCCL expects to spend more money on travel agents in the future - in commissions, training and sales and marketing. But the difference will be that RCCL also expects to spend more money on fewer agents.

Is the early booking system that RCCL invented dead? Not entirely, according to Fain, who said that the passengers who booked early did get a good deal. "It greatly improved the perception of our customers that they were treated fairly," Fain said, adding that the concept has been weakened more than he would have liked to see. ''More people are playing more games with discounts," Fain noted.

So far, RCCL's advance bookings for 1997 are ahead of where 1996 bookings were at this time last year, which in turn were ahead of the 1995 forward bookings, according to Fain. But beyond that, the usually cautious Fain seemed reluctant to speculate on the future.

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