Royal Caribbean Reports Disappointing First Quarter, But Slightly Better Outlook for 2014

allure of the seas
Photo by Susan J. Young

Royal Caribbean Cruises Ltd. (RCL), parent company of the Azamara Club Cruises, Celebrity Cruises and Royal Caribbean International brands, said its first quarter financial performance was adversely impacted by some voyage disruptions. But it also said that full year 2014 results will be slightly better than the guidance previously given by the cruise company to financial analysts.

Adjusted quarterly net income was sizably down – $46.1 million, or $.21 per share – compared with the adjusted net income of $78.2 million, or $.35 per share for the same period a year ago.

In a press release, the company said that “overall, the year is developing along the course the company previously anticipated.” It also noted that the impact of some first quarter voyage disruptions should be offset during the rest of the year.

Ticket sales and onboard revenue decreased by .5 percent for the first quarter ending March 31. One big reason was that six cruises were shortened or canceled between January and March. Both RCL and Carnival Corp. were impacted operationally when two cargo vessels collided in the Gulf of Galveston, spilling fuel and effectively closing the Houston channel to cruise traffic.

allure of the seas
Photo by Susan J. Young

Positive signs? Booking volumes for the past three months are up about 16 percent year-over-year, with bookings for the past eight weeks up by more than 20 percent, which RCL characterized as “stronger than typical post-Wave periods.”

For example, the company experienced a record booking week at the end of February which is an unusual time for so much activity, according to the cruise company's earnings release. Load factors were also higher than at the same time last year.

“While the promotional environment in the Caribbean has contributed to the strong booking volumes, demand has also increased for other itineraries,” said the RCL press release. From management’s perspective, "it is gratifying to see 2014 developing methodically along such a positive trajectory," noted Richard Fain, chairman and CEO.

RCL said demand for European sailings from all key sourcing regions and for China sailings was strong throughout the period; double-digit yield improvements are expected in both regions. 

Fain cited strength in global markets as more than compensating for a highly promotional Caribbean. The company said Caribbean yields for the first quarter were down slightly while yields in other itineraries were up.

European cruises comprise 22 percent of the company's capacity; Asia Pacific sailings account for 12 percent. Asian capacity will rise by 66 percent next year, however, when Royal Caribbean International sends the new Quantum of the Seas to home port permanently in China in mid-2015.

RELATED: Quantum of the Seas' China Move Prompts More Royal Caribbean Itinerary Changes

The company said its full year earnings per share are expected to range from $3.25 to $3.45 per share, while net yields should increase 2 percent to 3 percent.

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