Global slowdown impacts bookings in several international markets at Royal Caribbean

Johanna Jainchill
Johanna Jainchill

The cruise industry has gambled a lot on the ever-more-affluent global consumer, with huge international fleet expansion over the last few years.

With cruise ships based in ports from Shanghai to Auckland, New Zealand, to Ushuaia, Argentina, the Cruise Lines International Association said in January that internationally sourced passengers have been fueling the cruise industry's growth, with a 30% spike in non-North American cruisers through the third quarter of 2008.

It was particularly interesting then, to hear Royal Caribbean International CEO Adam Goldstein say during Royal Caribbean Cruises Ltd's fourth quarter earnings call that, "to the extent there is relative weakness, it is in our newer, more internationally-oriented products" as well as in Alaska and short cruises.

It wasn't so long ago that cruise executives were hunting for new, exotic ports around the globe in which to place their growing fleets. Consumers were flush with cash; boomers had plenty of vacation time; and a been-there-done-that attitude pervaded Caribbean itineraries, which offered far lower yields than the ships sailing out of Venice, Barcelona and Singapore.

But what a sea change a few years can bring.

"To the extent there is relative strength," Goldstein said during the call, "it is in the Caribbean seven-night cruise market and in Mexico. Given the significant increase in European capacity, we are naturally concerned about the upcoming season.

"While we remain optimistic about our global growth opportunities, the slowdown in bookings in a number of our priority international markets was even more pronounced during the fourth quarter than the slowdown in North American bookings," he added.

Goldstein said that there was also weakness in the Brazil, Singapore and Spanish-speaking Latin American markets, but that the U.K. and German markets were holding up well and that Australia was "showing promise."

Despite the slowdown, RCCL CEO Richard Fain said Royal Caribbean would not give up on its international aspirations.

"While cutting costs throughout the organization, we have not cut back our strategy of substantially growing our non-U.S. sourcing," he said. "In fact, we continue to increase our investment in international growth despite our cost-cutting program. This may lead to some short-term earnings penalty, but in the long term it diversifies our sources and increases our opportunities."


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