U.S. travel agents will get an additional Royal Caribbean
International ship to market in 2016, though not one with a lot of novel new
“wow” features and premium-priced staterooms.
The ship is the 25-year-old Empress, which is now sailing
for the Spanish brand Pullmantur. It will be rebranded as the Empress of the
Seas and returned to the Royal Caribbean fleet.
Moving the 2,020-passenger ship to “right size” the
Pullmantur fleet reflects the prolonged troubles that have afflicted the
Spanish brand since the 2008 economic slump.
Royal’s parent, Royal Caribbean Cruises Ltd. (RCCL), said it
would take a $400 million impairment charge to reflect the decline in
Pullmantur’s value. The brand will be refocused on Spain after several years of
primarily being marketed in Latin America.
The Latin America strategy has been doomed by an economic
downturn in South America, including a 22% decline in the Brazilian real
against the dollar in the last quarter.
“This type of precipitous decline dashed our hopes and plans
for Pullmantur in Latin America,” RCCL chairman Richard Fain told Wall Street
analysts in an earnings call.
So RCCL is pulling the brand back to its Spanish roots.
Asked why the company doesn’t just shut down the line entirely, Fain said a
Pullmantur with just two ships has a chance to match supply with demand in
“We do think that there is opportunity with those assets and
with the positioning of the brand to do well,” he said.
Empress will rejoin Royal in the spring on an as yet unnamed
itinerary following what the company described as an “extensive drydock.”
When the ship debuted in 1990 as the Nordic Empress, it was
the first new vessel to sail the short cruises from Miami to the Bahamas that
are now offered on the Majesty of the Seas.
Royal has announced that following its own upgrades, the
Majesty will sail to the Bahamas next summer from Port Canaveral.
Despite Pullmantur’s problems, analysts were mostly
impressed with RCCL’s third quarter, which produced a net income of $228.8
million after the impairment charge, compared with $490.2 million a year
Revenue was $2.52 billion, up from $2.38 billion.
Patrick Scholes, an analyst at SunTrust Robinson Humphrey,
raised his prediction of RCCL’s earnings to $1.05 billion in 2015 and to $1.4
billion in 2016. He cited strength in the Caribbean and China, as well as
Royal’s 7-month-old program of not discounting close-in cruises, which “improves customer and travel agent
satisfaction,” Scholes said.
In the current
quarter, a season when Caribbean sailings account for 47% of capacity,
inventory is nearly sold out and business is much more favorable than at this
time last year, with expected yield improvements in the Caribbean in the mid to
high single digits, Royal said.
Fain said the booking curve has grown by 30 days over the
past two years, so that 2016 load factors are currently the highest in the
company’s history, and prices are also ahead of the same time last year.
Caribbean sailings of all lengths are “nicely ahead,” with
the new Harmony of the Seas showing particular strength, Fain said.
He added that the net effect of the price integrity program
will be to decrease revenue in 2016 as some cabins sail unoccupied.