URL copied to the clipboard!
Crediting better foreign exchange and fuel rates as the biggest drivers of a 26 percent increase in second quarter earnings, Royal Caribbean Cruises Ltd. officials today updated 2015 guidance, saying they anticipate full-year earnings to be almost 40 percent higher than last year.
Leading off today’s Q2 earnings call by saying there is “a lot of good stuff to talk about,” RCL Chairman and CEO Richard Fain noted that the company’s Double-Double Program, announced one year ago, “is solidly on track to meet our twin goals of doubling our 2014 profits and reaching double ROIC by 2017.”
Reaffirming the “three pillars of the program” –moderate capacity growth, continuing to hold costs to a “realistic” level and higher revenue yields – Fain focused on the latter two since “capacity growth is firmly in hand.”
While cost guidance is up slightly from Q1, it is still less than initial guidance of 1 percent or better, he said.
Growing revenue, however, is the most important pillar of Double-Double, and one of its key drivers is “stimulating quality demand in the marketplace for our products,” Fain continued. So RCL is making a modest increase in its marketing investment for the remainder of 2015.
“As we shared in prior calls, we remain in the best book position in our company’s history, and investing in additional marketing now will help us to further seed this healthy position into 2016,” Fain explained.
Newbuilds Quantum of the Seas and Anthem of the Seas “have definitely not disappointed” as other key drivers of revenue growth, getting warm receptions from cruisers in China and the United Kingdom, respectively.
The Asia Pacific region has seen the most significant capacity growth year-to-date, with China now more than 95 percent booked, “validating our decision to send Quantum this year and her sister ship, Ovation of the Seas, to Tianjin next summer,” said Jason Liberty, RCL Chief Financial Officer.
Growth in that blossoming region also helps mitigate the traditional seasonal fluctuations in global business and better align the supply and demand environments where RCL ships sail, Fain said.
The CEO also reaffirmed RCL’s commitment to the “price integrity” policy adopted in March “to address the kind of deep, last-minute discounts that are so frustrating to our guests and our travel partners, and ultimately so damaging to our brands.”
While “last-minute” might be 10 to 40 days out from sailing, “from that point on our policy is to hold our price at the prior level,” Fain said. “We recognize that this policy is costing us some money in the short term. But we believe that in the long term it will pay handsome dividends.”
For full details of RCL’s Q2 report and guidance update for 2015, see the release posted at Investor Relations.