Royal Caribbean Cruises Ltd. expects to earn even more money per passenger this year because of strong demand for cruises, higher booking prices and greater guest spending. The cruise-ship operator said Wednesday it had a record wave season, the peak January-to-March booking period for cruises.
For the full year, Royal Caribbean expects net yield—a closely watched metric that reflects pricing performance—to rise by 7.5% to 9% from a year earlier excluding currency fluctuations. It previously guided for net yields to rise 6.5% to 8.5% in constant currency.
“We are particularly pleased with the pricing power we have achieved so far this year,” Chief Finance Officer Jason Liberty told analysts during a first-quarter earnings conference call.
Royal Caribbean's booking levels, combined with strong onboard spending, suggest the demand for cruising is healthy, analysts from Bernstein Research said, adding that consumer- spending trends don't suggest a recession is ahead.
Industry trade group Cruise Lines International Association has forecast 30 million travelers would take cruises this year, up 6% from 2018. Shares of Royal Caribbean rose 6.7% to $129.03 despite the company's cutting of its full-year earnings forecast due to a shipyard accident last month in the Bahamas, a stronger dollar and higher fuel prices.
Other cruise operators' stocks also rose Wednesday, with Norwegian Cruise Line Holdings Ltd. gaining 2.9% and Carnival Corp., the world's largest cruise-line operator, rising 1.8%.
Royal Caribbean now expects 2019 earnings excluding special items of $9.65 to $9.85 a share, compared with its previous guidance of $10.15 to $10.35 a share.
On April 1, two construction cranes toppled onto Royal Caribbean's Oasis of the Seas cruise ship, which was undergoing maintenance at the Grand Bahama Shipyard. There were no serious injuries, Chief Executive Richard Fain told analysts.
“This is a very unusual event and not only have we never experienced anything like it, I've never heard of anybody else ever experiencing it either,” Mr. Fain said on the call.
The Oasis of the Seas ship was damaged and taken out of service, resulting in three sailings being canceled last month. The ship is expected to return to service for a scheduled May 5 sailing, the company said.
Royal Caribbean also said Wednesday its fuel costs for the year are expected to rise. Based on current fuel prices, the company has included $707 million of fuel expenses in its 2019 guidance. The company previously had expected $690 million of fuel expenses for the full year.
In the latest period, Royal Caribbean said strong demand helped it post record quarterly results. Profit rose 14% to $249.7 million, or $1.19 a share. Excluding one-time items, earnings were $1.31 a share, which beat analysts' expectations. Revenue rose 20% to $2.44 billion.
“We're both delighted and a little bit surprised with this very nice outlook as our initial guidance was already very strong,” Mr. Fain said.
BY AISHA AL-MUSLIM