Royal Caribbean profits hit by heavy discounting

Heavy discounting in Europe due to the region’s economic woes and the impact of the Costa Concordia disaster have taken a toll on Royal Caribbean Cruises Limited.

The company saw last year’s second quarter profits of $93.5 million wiped out as it reported a loss of $3.6 million for the same three months this year.

RCCL said demand remains solid in the Caribbean and Asia, but “larger than anticipated discounting” has been required in Europe in the period to June.

Chief financial officer Brian Rice said:  "It is hard to distinguish how much of the pressure in Europe is connected to the Costa Concordia incident and how much is due to the economic roller coaster.

"Our sense is that the former is no longer having a major impact on our bookings especially amongst experienced guests.

“However, the timing of the incident left a big gap during our peak booking period and filling that gap is disrupting our normal booking patterns."

The parent company of lines such as Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises, said it has been able to offset more than half of the yield declines through additional spending reductions.

The strengthening of the US Dollar and decreases in fuel pricing have essentially offset one another since April, the company said.

Chairman and chief executive Richard Fain said: "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.

“Overall we have seen about a 100 basis point drop in our yield projections, but we expect to offset over half of this decline with lower spending."

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