Royal Caribbean Cruises Ltd. (RCCL) Chairman and CEO Richard Fain told Wall Street analysts he plans to hold firm on prices for 2015, even at the expense of some decline in occupancy.
In a conference call, Fain said the 2015 year is shaping up strong, with more bookings in hand at higher prices than at this time a year ago. Although the first quarter in the Caribbean will still be hurt by the industry's glut of capacity there, Fain said he feels less pressure to discount.
"Clearly, we feel we're in a position to hold the price and not give the kind of last-minute discounts that were a feature this year, particularly in the Caribbean," Fain said. "We think we're in a position to do that. That's our plan going forward."
The call was to discuss RCCL's third- quarter financial results: Net income rose 34%, to $490.2 million; revenue advanced by $77 million, to $2.38 billion.
Fain twice during the call addressed concerns about whether the spread of the Ebola virus would damage travel demand. He said that while the probability of an outbreak in North America is "zero," fear of the disease is understandable.
"It's hard to assess the fear factor," Fain said. "So far, we have not seen any big impact on our bookings."
Later, during a question-and-answer session, Fain said the most relevant comparison was the emergence of SARS in 2003. "We're not seeing anything like the situation we had with SARS," he said. "The impact so far has been very small."
For the fourth quarter, meanwhile, the company said it expected net income of $77 million to $89 million.
SunTrust Robinson Humphrey analyst Patrick Scholes had projected Q4 net income of about $104 million. He said RCCL's forecast for revenue yields to increase 2% was well below his own forecast and the Wall Street consensus.
In Q1 2015, crowding in the Caribbean is still expected to depress yields there, although that will be offset by strength elsewhere, company officials said.
RCCL said it was comfortable with an earnings forecast of about $1 billion for 2015. Scholes said Wall Street expects $1.03 billion.
Fain described the plan to curb last-minute discounting as "a bit of a change" that is enabled by better markets. "It is not a trivial one," he added. He reiterated that discounting causes distress for passengers who book early only to see fares drop after final payment has passed.
"It is a significant source of discontent," he said.
Fain teed up the arrival of the Quantum of the Seas next month by listing the hallmarks of each recent ship class at Royal Caribbean. He said Voyager- and Freedom-class ships created a new style of ship, while the Oasis class was notable for its scale.
He made a pitch that the Quantum class should be hailed for "nonphysical" elements such as its dining, entertainment and technology innovations. Fain said it is worth noting that those elements can be rolled out fleetwide more quickly and easily than hardware features.
Already, the Oasis of the Seas has received the extra-fast satellite Internet service that will be featured on the Quantum and was outfitted in a recent drydock for Dynamic Dining, which divided its main dining room into smaller, themed restaurants.
"The fact they can be installed on the other ships in our fleet makes them especially beneficial for our brand," Fain said.