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Royal encouraged by 'very different tone in the market'

Royal encouraged by 'very different tone in the market'
Good demand and strong pricing across all markets apart from the Caribbean, which remains challenging, characterize 2015 so far, Royal Caribbean management said Thursday.

'It's very encouraging to see a very different tone in the market,' chairman and ceo Richard Fain told analysts during the company's third quarter earnings call.

'The tone for 2015 is just very different ... (It's) simply very encouraging for us.'

All Royal Caribbean markets are looking 'robust' for the last nine months of 2015. The exception is the first quarter when there's a Caribbean capacity increase for the industry and for Royal, which adds Quantum of the Seas.

In Q1 70% of Royal's capacity will be in the Caribbean, where occupancy is currently higher than a year ago but pricing is lower. However, higher occupancy should help on-board revenue, which was up for the 11th consecutive quarter in the just completed Q3. For the full year, the Caribbean is 44% of capacity, and capacity will be down 5% in the summer year over year.

Q1 Caribbean pricing challenges are being offset by Asia, Australia and South America, which are all performing well, cfo Jason Liberty said.

The company will be fielding more capacity next year but thanks to stronger advance bookings it has fewer cabins to sell in the US and Europe than a year ago so Fain said there is less pressure for last-minute discounting.

The China cruise market will balloon 68% in 2015, including the addition of Quantum of the Seas at mid-year. Asia-Pacific sees the company's most significant capacity growth, from 12% to 15%, with China accounting for 10% of Royal Caribbean's capacity next summer.

Europe will comprise 22% of total 2015 capacity including highly competitive ships, the new Anthem of the Seas from the UK and Allure of the Seas from Barcelona and Rome (Civitavecchia). About two-thirds of passengers on European sailings are sourced from Europe, with the balance from North America.

Concerning the company's 'Double-Double' initiative—which aims for double-digit return on invested capital and doubled earnings per share within three years—'We are pleased with our progress ... We are on a roll,' Fain said.

Double-Double's main components are improving revenue yields, containing costs and modest capacity growth.