"2010 results were better than we ever imagined," said Richard Fain, chairman and CEO of Royal Caribbean Cruises, Ltd. (RCCL), parent company of Royal Caribbean, Celebrity Cruises and Azamara Club Cruises. And looking into the future, the line expects 2011 to be a record year.
Deals or No Deals?
Prices Up, Wave Season Booking Strong. Executives offered few specifics on the direction of cruise fares, but as in previous calls, they noted that prices across the board are slowly ascending. Fain and others said that Wave Season, the January-to-March period when cruise lines showcase extra-value offers to drum up interest in summer cruises, was off to a good start.
Still Not Back to 2008 Pricing. "At the same time," added Fain, "it's interesting to note that even with the robust bookings we're seeing during this Wave period, our yields in 2011 still look to be about 6 percent lower than they were in 2007 or '08."
Eye on European Cruise Pricing. Execs did mention, however, one particular region worth monitoring: Europe. Royal Caribbean and Celebrity have record European deployments in 2011 (Royal Caribbean will have half of its 22 ship fleet there at some point this year), and so it remains to be seen what kind of discounting they'll have to do for Baltic or Mediterranean cruises as we approach the summer high season.
Ain't No Competition for Oasis-Class Fares. Goldstein was asked if Oasis of the Seas and Allure of the Seas would continue to command premium prices. "We don't see any potential new entrants into the category in the near future that would rival the types of features, amenities, choices and variety that Oasis-class ships offer to our guests," answered Goldstein. "So we would expect to continue to command premiums."
Do the Math: Profits
In the financial department, RCCL posted a net profit of $42.7 million on $1.6 billion in revenue during Q4 of 2010, compared to $3.35 million (on $1.45 billion in revenue) in the same period last year. Fuel costs came in at $4 million better than expected (reduced consumption hedging).
For the full year, net income was $547.5 million, compared with $162.4 million for the full year 2009. Revenues for the full year 2010 increased 15 percent to $6.8 billion from revenues of $5.9 billion in 2009. Net cruise costs excluding fuel declined by 1.6 percent, marking the third year in a row of reduced costs.
Still, not all analysts were excited about the Q4 results or RCCL's Q1 guidance, which was less virile than Wall Street expected. A Reuters report said the disappointment was connected to net yield, which takes into account operating costs and the number of days at sea. Net yield was up 3.2 percent in Q4. Analysts had expected an increase of about 5 percent. (Profits, however, beat expectations.) Executives blamed extreme weather conditions (snowstorms in Europe and the Northeast United States, plus the Brilliance of the Seas nightmare cruise) which impacted the company's voyages and impaired some passengers' ability to make their departures.
Future Tense: On the Cusp of a New-Build Order, Fixing Old Stuff
New Ship Orders. "I know the question, when will you be ordering another ship is out there, and it's waiting to be asked -- it almost always is," said Fain, preempting analysts at the top of the call. "I have previously confirmed that while we look forward to a period of slower growth, we do not aim to stagnate." The top dog then revealed to analysts that the company has a new-build project in the works, though no deal has been signed. Click here for more details.
Under-Construction New-Builds. Celebrity Silhouette, the fourth ship in Celebrity's Solstice class, will debut this July, and a sister ship, Celebrity Reflection, will launch in 2012. Both vessels will arrive larger and more amenity-packed than their three younger siblings, with changes focused around the now-iconic Lawn Club and the addition of extra cabins.
Oasis and Solstice Upgrades. In what's now a standard earning's call talking point, executive touched on RCCL's focus on refurbishing older ships -- four in total for 2011 -- to look more like their newer, more successful counterparts. Celebrity Infinity will head into dry-dock this fall, Celebrity Summit in Q1 2012 and Celebrity Millennium thereafter. Royal Caribbean is likewise adding Oasis-class elements (Broadway shows, cupcake shop, 3D movie capabilities, new kids' facilities) to its Freedom-class ships. Liberty of the Seas is currently in dry-dock in the Bahamas. Radiance of the Seas and Splendour of the Seas, two of Royal Caribbean's "mid-size" vessels, are also set for big upgrades this year.
Interesting Moments: Hard to Pronounce Words, Azamara Rumors
What's That Word Again? Barclays analyst Felicia Hendricks noted that "Solstice-ization," the Celebrity-coined term that refers to adding Solstice-class elements to older ships, was a mouthful. "The word is a little difficult, so apologies for that," chuckled an agreeable Dan Hanrahan, president and CEO of Celebrity Cruises. (It bears mentioning that Cruise Critic editors have been forbidden to utter "Solstice-ization" and "Oasis-ization" in the office.)
Is Azamara Club Cruises for Sale? The oft-forgotten sibling in the RCCL family -- during earnings calls at least -- is Azamara Club Cruises, the company's upscale two-ship line. An analyst asked about rumors that RCCL was thinking of selling or discontinuing Azamara due to poor performance. Fain did his best to quash the hearsay. "I've heard those rumors," he said. "We are not interested in selling either the brands or the ships. These rumors come up on all of our ships, and of course, as you know, everything is for sale at some price, but Azamara has actually had probably the biggest increase in our fleet in terms of both of passenger satisfaction and of pricing (percentage-wise)."
In Case You Missed It: "Nightmare Cruise" & Allure's Debut
Brilliance of the Seas Nightmare Cruise. In December, large waves and heavy winds caused Brilliance of the Seas to list several times while it was en route to Alexandria, Egypt. More than 100 passengers were injured, and all received full refunds. During the call, execs euphemistically grouped the event with its "weather-related incidents" that impacted the bottom line.
Allure of the Seas Launches. The second of two 5,400-passenger, 225,282-ton Oasis-class ships debuted in December. For an hour-by-hour look at the ship, check out our 24 hours/24 photos/24 things to do feature.
--by Dan Askin, Associate Editor