PHOTO: RCCL's strategy to expand in China includes moving the Quantum of the Seas there in April. (Courtesy of Royal Caribbean International)
Royal Caribbean Cruises Ltd. brands entered 2015 with "the best booked status in our company's history," Chairman and CEO Richard Fain said.
That's on top of what he termed a "record-breaking year for our company, by any measure."
However, the first quarter this year continues to be challenging in the crowded Caribbean although things look considerably brighter for the next three quarters, Fain told financial analysts in a conference call for fourth-quarter and full-year 2014 earnings.
"Bookings, once we get beyond the first quarter, are really very powerful," he said. "I'm quite comfortable, particularly as we're looking forward."
Despite the lingering challenges, Fain characterized business this month as indicative of a "very strong typical Wave Period."
RCCL reported adjusted net income of $755.7 million, or $3.39 per share, for the full year 2014, compared to $539.2 million, and $2.44 per share, for the full prior year, for a 40 percent increase in adjusted earnings. Fourth-quarter net income was $70 million, or 32 cents per share, which fell below Wall Street expectations of 41 cents.
Fain also told the analysts that the cruise brands are offering more value-added promotions instead of slashing fares, a tactic that is working.
"Celebrity Cruises' 1-2-3-Go! program is a very successful program," he said. "Instead of offering discounts, we will bundle in a drinks package, onboard credit or prepaid gratuities. It's proving to be very popular with consumers and it's popular with travel agents because it effectively increases their commission because it bundles more into the fare that is commissionable. Instead of touting ourselves on price we tout ourselves on what we are offering."
Fain also addressed the company's strategy in China, where it plans to start a Chinese cruise line in a joint venture with Ctrip.com International Ltd., a leading Shanghai-based travel seller. RCCL also is selling the Celebrity Century to Ctrip in April and is moving the new Quantum of the Seas to Shanghai in April.
"Our strategy for China is very clear. We want to be synonymous with cruising in China," Fain said. "The Chinese consumer is clearly loving the Royal Caribbean product there. In China, the brand is very important, so we're investing heavily both in terms of management and hardware, ensuring we are continually strengthening the perception of our brand. And we are educating the Chinese consumer because it is such an embryonic industry there most consumers don't know much about it."
He said RCCL's capacity in China grew 45 percent last year and will grow 66 percent in 2015. "We think this is a market that our product is well-suited for, and where the market itself is growing. The middle class in China is growing at such a fast rate that it won't be long before there are more people in the middle class in China than there are people in the United States. It has great potential for us, and we're working to address that, both through the Royal Caribbean brand but also through Ctrip."
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