The pain in Spain, and the rest of Europe, goes on for Royal Caribbean

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Reports of Royal Caribbean Line’s $392 million (£250 million) loss in the final quarter of 2012, announced yesterday, have concentrated on a mark-down in the value of the company’s Spanish arm, Pullmantur.
The world’s second-biggest cruise operator, which also has Celebrity and Azamara among its portfolio of brands, would have been in profit if it had not been for the accounting procedure.
But chief executive Richard Fain explained that strong performance in America was making up for weaknesses in Europe – including Britain.
Paraphrasing Charles Dickens, he referred to “A Tale of Two Continents” – which suggests that 2012 combined the best of times and the worst of times for Royal.
“We’re happy with the strong bookings we’re seeing in the United States, but we’re unhappy about the weakness we’re seeing in many of the European Union countries, most notably Spain and the UK. Even though the economies in the US and in places like Germany and France still aren’t great, it’s really the weakness in Southern Europe that is keeping our yields from truly exciting growth.
“It has been a long period of disappointing economic news in Europe, and that news hasn’t ended yet.”
The company is tackling the Euro challenge by moving some of its fleet to other parts of the world. Its cruise capacity in Europe will reduce by 10 per cent while ships cruise in the Asia-Pacific region. “It’s particularly interesting to note how well both Australia and China have held up,” said Fain. “Both are looking towards flat to higher yields despite very large capacity increases.”
Chief Financial Officer Brian Rice explained that the Pullmantur decision had been taken because the company took “a rather grim view of the Spanish economy,” adding that RCL remained confident the line could diversify to markets outside Spain.
Rice said the number of cruises sold in the UK had been disappointing, although fares were higher than those achieved in the previous year.
European cruises account for 27 per cent of Royal Caribbean’s total capacity, said Adam Goldstein, with voyages to the Norwegian fjords and the Baltic considerably up compared to the Mediterranean.
About a quarter of the passengers on European sailings are from the US and Canada and Goldstein noted that the close-to-home passengers leave it later to book – with the result that 50 per cent of capacity for the year remain to be sold. Which may explain the rash of bargain deals being promoted by travel agents in the past few days.
Elsewhere, territorial tension between China and Japan over disputed islands in the East China Sea was highlighted as a factor limiting both itineraries and demand in the region. Unlike rivals Princess Cruises, which is expanding rapidly into the Japanese market, Royal has chosen to eliminate almost all Japanese ports of call, sending its ships to South Korea instead.
► Pullmantur will gain a fourth ship in April when Monarch of the Seas is transferred from Royal, to operate in the Southern Caribbean. However, the fleet will be back down to three again after Zenith is moved to Royal’s French brand, Croisiere’s de France, in April 2014.

Earnings call transcript courtesy of seekingalpha.com

By | 2017-06-15T15:59:39+00:00 5 February 2013|Cruise News|0 Comments

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John Honeywell is a travel writer specialising in cruise ships and cruise travel. Winner of CLIA UK's Contribution to Cruise award 2017.

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