With capacity up 2.6 per cent, higher ticket prices and onboard revenue were the main drivers for Royal Caribbean Cruises reporting record results today in the second quarter.
Royal Caribbean reported net income of (GAAP) $466.3 million, or $2.19 per share, on revenues of $2.3 billion for its second quarter ended June 30, 2018, compared to net income of $369.5 million, or $1.71 per share, on revenues of $2.2 billion last year.
Ticket revenue per passenger day was $163.76 for the second quarter of this year, compared to $158.92 last year and the onboard spend was $65.12 compared to $61.70 per passenger last year.
Operating expenses rose moderately at $128.70 per passenger day with increases in all expense categories, from $126.30 last year.
With operating income of $456.9 million this year, up $37.2 million from $419.7 million, $9.4 million in interest and other income this year, compared to a $50.2 million in interest and other expenses last year, contributed further to boost net income to $466.3 million over $369.5 million.
The increase in per share income was also boosted by fewer outstanding shares, a result of Royal Caribbean’s share buyback program. Outstanding shares numbered 212.5 million, compared to 216.1 million for the same period last year.
Royal Caribbean reported 10,213,067 passenger cruise days this year, up from 9,950,570 passenger cruise days last year, and 1,461,055 passengers, compared to 1,433,339 in 2017.
Cruise line yields could fall in the future due to the volume of new ships entering the market in the next decade, according to the boss of MSC Cruises.
A total of 106 ships are expected to launch between 2017-26, including 12 alone from MSC Cruises. Other mainstream cruise brands such as Royal Caribbean International has six ships on its order books and Norwegian Cruise Line has seven. 48 expedition and luxury ships are also planned.
Asked whether occupancy levels were at risk of falling from so much growth, chief executive Gianni Onorato told delegates at the ITT Conference in Sicily: “No, we are not crazy. But in difficult times it can have an impact on yields more than occupancy. So I think this will be more of an issue than occupancy levels.”
Onorato said the slowdown in cruise bookings last year in the UK was due to a “lack of capacity” in 2017 and said he was very “optimistic” about the British market going forward.
He said the biggest challenge facing cruise lines was future proofing ships which are built to last 20 years.
“Knowing what guests want in 2040 when you’re building them now is very difficult to predict so we need to have a flexible mindset and be able to follow guests’ needs (in terms of technology) but at the same time maintain human contact,” Onorato said.