Business | Tourism

Royal Caribbean bets on US demand

4th quarter EPS ex-impairment 10 US cents vs 6 cents view

  • Reuters
  • Published: 13:16 February 5, 2013
  • Gulf News

New York: Royal Caribbean Cruises Ltd, the world’s second-largest cruise operator, on Monday said that strong US demand and a jump in bookings so far this year would help mitigate lingering weakness in Europe in 2013.

The cruise operator gave a revenue forecast that Wall Street took as the latest sign of improvement after a difficult 2012:

Royal Caribbean expects net yields, which reflect passenger tickets as well as what customers spend on board, to be up 2 per cent to 4 per cent this year, excluding currency fluctuations.

The cruise industry was slammed last year after the Costa Concordia, a ship operated by Royal Caribbean’s larger rival Carnival Corp & Plc, ran aground off the Italian coast, killing 32 people, scaring off many vacationers.

“This is more evidence of recovery — the industry seems to be getting past the accident and returning to a pattern of net yield growth,” ITG analyst Matthew Jacob told Reuters, noting that Wall Street was expecting far more modest net yield growth.

Royal Caribbean said bookings in recent weeks were about 20 per cent higher than a year earlier in the aftermath of Costa Concordia.

In December, Royal Caribbean shares were hit when Carnival gave a weak forecast that suggested the cruise industry was not recovering as quickly from the disaster as previously hoped.

The company expects record yields on its Caribbean and Alaska itineraries to “more than offset” slow demand in Europe where a weak economy, particularly on its Mediterranean rim, and lingering impact from the Costa Concordia have hurt sales.

“Looking forward, we see a tale of two continents; North America is doing well, while parts of Europe continue to be a challenge,” Chief Executive Richard Fain said in a statement.

Longer term, Royal Caribbean sounded a bullish note for Europe where customers are getting used to a tough spending environment.

“We are optimistic that the (European) public is coming to terms with this new normal,” Fain said on a call with analysts.

Royal Caribbean reported a fourth-quarter net loss of $392.8 million, or $1.80 per share, on revenue of $1.81 billion, compared with a profit of $36.6 million, or 17 cents per share, on revenue of $1.78 billion a year earlier.

The loss stemmed from a $413.9 million impairment charge related to its Spanish cruise line Pullmantur, which has been hit by austerity measures in that country. The company said it has seen a “significant deterioration” in demand in Spain.

Excluding the Pullmantur write-down, Royal Caribbean reported a profit of 10 cents, beating Wall Street estimates by 4 cents, according to Thomson Reuters I/B/E/S/.

Royal Caribbean, whose lines also include Celebrity Cruises and Azamara Club Cruises, anticipates 2013 earnings of $2.30 per share to $2.50 per share.

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