Royal Caribbean Cruises Ltd. reports a strong start to this year’s Wave Season, but cautions that the full impact of the coronavirus outbreak remains uncertain. The company made the statement as part of its 2019 full year financial results.
Wave Season & Coronavirus
In the report Royal Caribbean said that Wave Season is off to a robust start, with demand especially strong in the U.S. and European markets. Overall rates and booked load factors are both higher than the same time last year, the cruise company said. Additionally, while events such as the Australian brushfires and unrest in the Middle East have impacted demand for certain itineraries, Royal Caribbean said that its core products have “more than compensated.”
Looking ahead, the company said that it expects new ships and attractions to drive revenue for the rest of this year. Four new ships are scheduled to make their debut this year: Celebrity Cruises’ Celebrity Apex in the spring; Silversea Cruises’ Silver Origin in the summer and Silver Moon in the fall; and Royal Caribbean International’s Odyssey of the Seas in the fall. Due to the timing of these ship deliveries, the company said that it expects more significant yield growth in the second half of the year than in the first half. For all of 2020, net yields are expected to increase in the range of 2.25 percent to 4.25 percent on a constant-currency basis.
The company said it does expect some negative impact from the coronavirus outbreak and the measures being taken to contain its spread.
“While we expect this to be temporary, the situation is highly fluid and the overall impact cannot reasonably be estimated at this time,” Royal Caribbean said in a written statement. “Accordingly, our guidance does not include any provision for the impact of the outbreak. We will update our guidance as the situation stabilizes and we can reasonably estimate its impact.”
At this time the company says that it expects an erosion of consumer confidence in China could have an additional impact on load factor and rate until the market normalizes. Additionally, if travel restrictions and consumer concerns over the virus continue for an extended period of time, they could have a material impact on the overall financial performance of the company.
Eight Royal Caribbean cruises out of China have now been cancelled through March 4 due to the virus, and other itineraries have been modified. The company estimates the impact of these changes at $0.25 per share.
2019 Full Year Results
For the full year of 2019, Royal Caribbean’s U.S. GAAP net income was $1.9 billion, up from $1.8 billion in 2018.
“This result was achieved despite a series of extraordinary events including the dry-dock incident in the Grand Bahama shipyard, the cancellation of the cruises to Cuba and an unusual hurricane season, all of which negatively impacted the company's results for the year,” the company said in a written statement. The negative impact of the Cuba cancellations and Hurricane Dorian was particularly strong during 2019’s fourth quarter, when U.S. GAAP net income fell to $273.1 million versus $297.4 million for the fourth quarter of 2018.
Net yields were likewise up, by 8 percent on a constant-currency basis. Royal Caribbean said that the consolidation of Silversea’s operations, the new cruise terminal in Miami, the revitalization of Perfect Day at CocoCay, new hardware and strong demand all drove this increase.
20>25 Plan
As part of the release of its 2019 results, Royal Caribbean also announced its new 20>25 plan, a series of specific goals for the company. The program includes several goals by 2025: delivering $20.00 adjusted earnings per share; further reducing the company's carbon footprint by 25 percent; delivering strong returns on invested capital; and continuing to improve on record guest satisfaction and employee engagement metrics.
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