30 January 2009

More cruise discounting predicted

Royal Caribbean Cruise Lines is having to employ "aggressive pricing actions" in an effort to stimulate weak demand for future cruises.

The peak January Wave booking period has so far produced booking levels similar to last year but at "significantly" lower prices.

Chief financial officer Brian Rice said: "We recognise this will be a very challenging year and do not expect any quick turnarounds in our pricing.

"Consumers are certainly delaying their purchase decisions, but as they get closer to their vacations, they appreciate a great value and are buying cruises."

He was speaking as the cruise group released 2008 profit figures, down to $573.7 million from more than $603 million the previous year.

The net profit decline came despite increased revenues of $6.5 billion against $6.1 billion in 2007.

The company also revealed that its core Caribbean cruises are seeing stronger demand than its premium seasonal itineraries such as Europe and Alaska.

Onboard revenue, which until the fourth quarter of 2008 had remained resilient, has also been reduced in the company's guidance.

Royal Caribbean said it continues to successfully expand the proportion of its business that comes from outside the US, but this "also makes currency issues more relevant to the company's results".

Chairman and chief executive Richard Fain said: "The fourth quarter was an extremely difficult operating environment and we expect even more challenges in 2009.

"Nevertheless, I am pleased by our success in reducing costs without compromising the guest experience.

"Although the Wave period has only just started, we are encouraged by what we have seen so far; pricing is still very difficult, but booking patterns have begun to stabilise."

by Phil Davies