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Europe key driver of Royal Caribbean profit, Alaska yields nearing record

Bayley - 'extremely strong demand' for Europe
European deployment is the key driver of Royal Caribbean's profitability with 'extremely strong demand' pushing up yield, while Alaska is performing well, too, Michael Bayley, president and ceo of Celebrity Cruises, said Thursday.

Capacity-adjusted bookings for Europe cruises have been up 25% year over year in the past three months, and load factor is the highest it's been since 2007—before the global recession.

Overall, a second year of yield growth is expected, with Europe yields forecast to be up double-digits from 2013.

Demand from North America for European cruises is particularly strong, and more than 80% of the forecast revenue from the US and Canada is already on the books, considerably more than at this time last year, Bayley said during Royal Caribbean's earnings call.

The company's ChoiceAir program makes it easier for North Americans to plan a Europe cruise, and locking in the air helps bookings stick.

Celebrity's seven-night round-trip and open-jaw, combinable itineraries 'continue to surpass expectations,' while Oasis of the Seas' 2014 Europe stint is 'performing very well.'

Bayley cited a host of additional factors in Europe's favor.

There is less capacity in the Mediterranean, and the creation of single-branded sales and marketing teams in the UK and Ireland market is showing positive results in the form of pricing strength. The brands and products are strong in Europe, following investments in sales and marketing.

Demand in southern Europe is bouncing back, too—from Spain, in particular.

The sales cycle is currently transitioning from North American to European bookings for Europe cruises, and the European source markets are 'picking up quite nicely,' Bayley said.

Meanwhile, Alaska continues to be a 'solid performer' and is shaping up as one of Royal Caribbean's highest yielding destinations in the second and third quarters, with yields expected to be similar to those in the company's record 2011 Alaska season.