Royal Caribbean Cruises (RCL) surprised observers with an unexpectedly strong fourth quarter and boosted its guidance for 2010, saying on-board spending and passenger bookings are rebounding better than anticipated. The parent company of Royal Caribbean International and Celebrity Cruises was expected to post weak results, and had warned that its bookings and yields -- revenue per cabin -- were still depressed by the recession. Instead, it posted net income of $3.4 million, or 2 cents per share, more than double the $1.5 million it reported for the same period last year.That handily beat both Wall Street's expectations of a loss of six cents per share for the quarter and the five cent per share loss the company's management had previously forecast.
"We're happy to say 'Sayonara' to 2009," said RCL Chairman Richard Fain.
During a conference call with analysts, RCL executives said they are far more optimistic about 2010 than they were even a few weeks ago.
The wave season -- the period through March during which lots of the year's sailings are booked -- is off to a good start, said Fain. Bookings are up, along with prices, so RCL is expecting good yield growth this year, he said.
Net yields were down 7.2% for the fourth quarter, but CFO Brian Rice said they will be flat in the first quarter and turn positive in next quarters, to grow 3% to 5% for the year.
Big New Ships Not Diluting the Market
While bookings are still being affected by the economy -- Caribbean cruises are still being made far closer to sailing than before the recession -- bookings since September have been running 30% ahead of the year before, Rice said. That puts the company in a better position to reduce its discounting, he added.
Observers had been concerned that the addition of Royal Caribbean's 2,700-cabin Oasis of the Seas in December, as well as Celebrity's addition of more 2,850-passenger Solstice-class ships, would drive down yields, but RCl's managers insist that it has had the opposite effect. Adam Goldstein, CEO of the Royal Caribbean International line, said the Oasis, launched in December, is showing "considerable ticket price premiums" above all Caribbean cruise ships, and its on-board revenue is exceeding expectations. However, he would not break out those numbers.
The fourth quarter could mark a turn in Royal Caribbean's fortunes. After losing money during the first half of 2009, it turned a profit in the third quarter, but that's normally a can't-miss period for cruise lines. Being in the plus side during the fourth quarter, traditionally a slow time of year, shows real progress in building revenue and cutting costs. The company forecast a profit of 25 to 30 cents in the first quarter, and $2 to $2.20 for the year.
Fain also took a moment to defend his company's decision to make a port call in Haiti just days after an earthquake devastated the country. Company executives "couldn't help agonizing" about the decision, but decided the water, supplies and tourist dollars the ships would bring were necessary for the relief effort, he said. Passengers have supported the decision, he said, and noted that many more than usual were going ashore during the Haiti stops and spending record amounts there. Fain noted 100% of the proceeds from those on-shore excursions are going to relief efforts.
"Haiti needed our help and we could not refuse," he said.
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