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On 26 July Royal Caribbean reported a US$3m loss for the second quarter of this financial year, compared with a US$93m profit for the same quarter last year.

I don’t usually report financial results here, but this one is interesting because it casts a light on how the cruise industry is finding the current financial climate. Richard Fain, RCCL’s chairman and CEO made this comment:

“The steady drumbeat of negative news emanating out of Europe is certainly having an impact. As a result, we are seeing pluses and minuses in the different geographical markets – North America is holding up reasonably well; Asia is a big plus; but Europe is a pretty consistent minus.”

The reports also says: “Business demand remains solid in the Caribbean and Asia, but larger than anticipated discounting has been required in Europe.

Royal Caribbean have a significant number of ships in Europe during the summer months –  a number of Royal Caribbean ships, what seems like most of the Celebrity fleet, and both Azamara ships are deployed here. Most of them are in the Mediterranean, but some (e.g Independence of the Seas and Celebrity Eclipse) are based in the UK. Presumably, when the deployments were planned (probably two years or more ago) it was expected that doing so would generate more revenue than leaving the ships deployed around the USA, but obviously this hasn’t worked out. Indeed, those comments above suggest that it’s Europe that’s the cause of the problems. And if I’m reading the financial report correctly, Royal Caribbean are expecting another loss in the third quarter.

I’m not sure what conclusions to draw from this. It could be that it’s the ongoing recession in various parts of Europe that’s depressing demand and thus requiring the ‘larger than anticipated discounting’ in order to fill the ships. Alternatively, it could simply be that there are too many ships in Europe anyway, let alone in a year when people are feeling the pinch – all the US lines have been pouring ships into the Med in recent years, even Carnival has been here the last two summers. But looking at the figures in detail, although revenue has edged up a bit, overall, costs have increased even more. Some of this is increased fuel costs but in fact almost all other costs have increased as well. Why these other costs have increase isn’t explained.

There is one other interesting snippet. During the quarter total operating revenue was US$1,821m. Of that, US$1,332m came from ticket revenues and US$488m from ‘onboard and other revenues’. So onboard revenues amounted to about 27% of total revenues; put another way, revenue from tickets was almost three times greater than onboard revenue. Why is this interesting? Well, you sometimes hear suggestions that the cruise lines are happy to discount the ticket price because they will make more on the bar and the casino, etc, than they do from the ticket. The figures show that in fact ticket revenue is by far the more important.

Here’s a link to the Investor Relations page that holds the figures.

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