Another strong year for Royal Caribbean, and 2019 is looking up, too

Shares were up nearly 5% in early afternoon trading Thursday.

Earlier, chairman and CEO Fain had cautioned analysts about focusing solely on the advance booked position during the second quarter earnings call. 'Relying too much on one metric may lead you down the wrong path,' he said.

In this case, one gets the impression he's not cautioning about over-optimism.

Holding back inventory in a strong demand environment

Advance bookings often relate to deliberate choices the cruise company's revenue management team makes, Fain explained. For example, in a past period when the market looked very strong, the team withheld sales of top suites, reasoning that those could command an even higher fare closer to departure.

So Royal Caribbean's booked position looked worse, but it actually reflected the fact the company had greater confidence in future demand. Luckily, Fain said, 'We were right.'

In 2019, Royal Caribbean has more inventory in geographic markets that tend to book closer in. 'Our revenue management system accounts for that,' Fain said. Here, too, having a lower booked position is not a sign of problems, he stressed.

That said, CFO Jason Liberty noted: 'We're particularly impressed with the demand we've seen for 2019, with record occupancies and higher rates.'

The company wouldn't expect to be booked so well ahead given the greater percentage of short Caribbean cruises, mainly due to Mariner of the Seas, which recently emerged from a vast 'Royal Amplified' revitalization and is sailing three- and four-night getaways from PortMiami.

Mariner of the Seas booked well ahead

The Caribbean is seeing 'strong demand,' Liberty said, and 'Mariner is booked very well.' In fact, during the first half of 2019, the booking pattern for this three-/four-day ship is closer to that of a seven-day product.

With industry capacity up in the Caribbean, there's 'a lot of [investor] chatter or concern,' Liberty acknowledged, 'but the Caribbean is really booked as expected.'

Fain said last year's hurricane season may have left some travelers with the notion that destinations aren't in good shape, when in fact 'People should be impressed with how well the destinations responded.'

Travel agent recommendations and 'Internet chatter' show how well they've recovered, he added, and will go a long way toward assuaging doubts.

Meanwhile, Europe capacity is up and there is 'strong demand and pricing from all source markets,' Liberty said. 'Symphony of the Seas [currently sailing the Mediterranean] is definitely the star of the show.'

China booked 'nicely ahead'

China is booked 'nicely ahead in the back half of the year and into 2019.' Liberty credited Royal Caribbean's experienced team on the ground there with expanding the distribution network. Also, new Quantum Ultra-class ship Spectrum of the Seas will enter service from Shanghai in June.