Caribbean cruises losing market share, says Cruise Holidays

Cruise deckA smaller percentage of cruisers have booked Caribbean sailings for 2015, according to a forecast by Cruise Holidays International.

The survey shows 50.5% of cruise bookings for next year have the Caribbean as their destination, down from 54.8% in 2014.

Europe is gaining, with 12% of ocean cruises booked there next year, up from 10.4%. European river cruises account for 6.7% of bookings, up from 5.7% last year.

Cruise ship capacity in the Caribbean peaked in 2014 and is currently scheduled to begin declining in the second quarter of 2015, leaving fewer available berths.

The 2015 Cruise Trends forecast is based on bookings by 1,300 agents affiliated with Cruise Holidays.

A Dutch waterways cruise beginning in Amsterdam again is the most popular river cruise for 2015, followed by the Rhine/Main/Danube cruise through Central Europe, the Rhine Valley cruise, and a cruise through France on the Seine and Rhone rivers.

River cruises departing from two cities in Myanmar joined the list of top five non-European river cruises, after cruises departing from Beijing and Shanghai (tied for first) and one departing Ho Chi Minh City in Vietnam.
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Learning from RCCL’s cruise line partnerships

By Tom Stieghorst
*InsightForming partnerships to operate cruise lines is a tricky business that can have hard-to-predict consequences.

Take, for example, two cruise lines that Royal Caribbean Cruises Ltd. (RCCL) got involved with in Europe.

One, Spain’s Pullmantur, has been a qualified disaster. As the economy in Spain soured over the past decade, Pullmantur’s results worsened. Because RCCL had acquired Pullmantur outright in 2006, it had to accept the subsidiary’s losses as its own on profit or loss statements.

Last year, RCCL took a $414 million writedown of Pullmantur’s assets. The only positive has been Pullmatur’s growing business in Latin America.*TomStieghorst

The other cruise line Royal took an interest in is Germany’s TUI. It remains 50/50 partners in TUI with TUI AG, which means it can’t incorporate either losses or profits directly in its bottom line.

In this case, it wishes it could. Unlike Spain, the German economy has mostly been strong and TUI has been highly profitable.

“TUI Cruises has been a very solid performer,” RCCL Chairman and CEO Richard Fain said in a recent conference call with Wall Street analysts. “I dearly wish they were included in our yield stats because it would make them look very good.”

Royal Caribbean reported $18.8 million of “other income” in a third quarter in which it earned $490.2 million. Most of that came from TUI, CFO Jason Liberty said.

The exact structure of how cruise line partnerships are formed is worth keeping in mind as both Royal Caribbean and Carnival Corp. negotiate joint ventures in China to further their interests in that key country.

The devil is in the details, as they say. It should be interesting to see what the details are if and when these Chinese ventures are finalized.

RCCL aims to double earnings per share over next three years

By Tom Stieghorst
Royal Caribbean Cruises Ltd. (RCCL) set a dual goal of boosting its return on invested capital to double digits and doubling its 2014 earnings per share over the next three years.

The “Double-Double” program was announced in its second-quarter earnings report, which showed net profit soared to $137.7 million, up from $24.7 million a year earlier.

In publicly announcing its financial targets, RCCL said “articulating clear and specific goals helps guide internal decision-making as well as better informing investors of the path of the business.”

Net yields for the quarter were up 2.6%, at the top of RCCL’s guidance, driven by strong booking trends for Europe and China sailings. There was continued softness in the Caribbean.

RCCL said that because of the strong quarter, it was boosting 2014 projected profit by $22 million to a range of $755 million to $777 million.

Second-quarter revenue rose to $1.98 billion from $1.88 billion a year earlier.