Despite falling yields in China, Royal Caribbean Cruises
Ltd. won’t be pulling any ships out of the region.
RCCL executives spent most of its second-quarter earnings
call discussing China, one of two markets where yields declined in the second
quarter. Chairman Richard Fain gave an extended comparison of China’s evolution
with development of North American and European markets at earlier stages.
He emphatically ruled out shifting current capacity out of
China to Western markets if yields continue to drop next year. “It would
require an enormous change in the fundamentals to even consider something like
that,” he said.
Several topics were not even mentioned during the call,
including the prospects for starting cruises to Cuba and the outbreak of Zika
virus in a neighborhood of Miami.
One that did come up was the booking response to geopolitical
events in Europe, such as the truck attack in Nice, France, and the attempted
coup in Turkey. Royal Caribbean International president Michael Bayley said
that by the end of June, North American booking activity for Europe was
starting to wind down, so there wasn’t much impact. He said there’s been
relatively little reaction from Europeans.
“The European market seems resilient,” he said.
Increasingly, when incidents occur, “the recovery is a lot more rapid in both
markets, and certainly in the European market,” he said.
Also discussed was the absence of a booking impact from the
vote by the United Kingdom to leave the European Union. “We saw literally
nothing,” Fain said.
Besides China, specifically Shanghai where capacity
increased over 100% this year, the other area of global weakness was the
eastern Mediterranean. Celebrity Equinox will stay in the Caribbean next
summer, rather than do the Mediterranean itineraries it is sailing this year,
although Fain said the move was made because of the impact of Celebrity being
in the key Caribbean market year-round.
RCCL said net income climbed 23.8% in the second quarter to
$229.9 million, a result driven by lower-than-expected fuel expenses.
But unfavorable currency exchange and fuel trends led RCCL
to decrease its earnings expectations for all of 2016 by about $43 million, to
a range of $1.3 billion to $1.32 billion.