Royal Caribbean reports slump in new bookings

Royal Caribbean Cruises is forecasting a drop in yields in the fourth quarter following a ‘significant deterioration’ in new bookings.

The cruise line, unveiling its third quarter results, expects the economic and financial turmoil to lead to a 4% to 5% drop in yields for the rest of the year.

It said just over half of the decline from prior guidance is due to the stronger US dollar.

“While we are pleased with our third quarter results, the operating environment has changed dramatically in recent weeks,” said Richard Fain, chairman and chief executive officer.

“We are focused on responding to this challenge, but it is reassuring to know that our liquidity is good, that we entered this period with a solid order book, and that we have a business model that has proven resilient during tough times.”
Third quarter 2008 net income rose to a record $411.9 million, or $1.92 per share, compared to $395 million, or $1.84 per share in 2007.

Royal Caribbean said this improvement was due primarily to increased capacity, higher yields, and lower net cruise costs, partially offset by higher fuel prices.

“The company’s performance, during a period of such economic uncertainty and unprecedented market volatility, is a testament to our business model,” said Fain.

“Nonetheless, we are taking proactive steps to respond to these challenges. Our strong brand positioning, a management team focused on cost improvement and the most innovative fleet in the industry provide a strong and stable platform from which to weather a difficult 2009 and to capture the eventual benefit of a rebounding economy and a more optimistic consumer.”

For the full year 2008, the company expects earnings per share to be $2.73 to $2.78, based on today’s fuel prices.

The company said new bookings slowed considerably during the month of September, but have levelled off over the last couple of weeks.

“As we have seen during other challenging periods, our customers are delaying their further out purchase decisions,” said Brian Rice, executive vice president and chief financial officer.

“It is too early to respond to this atmosphere in a systematic way, but we have attracted short term volume in the traditionally weak fourth quarter using discounts. Had the value of the US dollar not strengthened, we would be forecasting flat yields in the fourth quarter.”

By Bev Fearis