Royal Caribbean and Costa Merger Update

“That really wasn’t the case,” said Rod McLeod, Executive Vice President of Marketing, Sales and Passenger Services, Royal Caribbean Cruise Line, about recent reports that RCCL broke off negotiations with Costa Crociere.

“The reality is that two big organizations… couldn’t find the right formula,” he added.

The discussions, which were confirmed last December, started off with interest by RCCL to buy a majority stake in Costa Crociere, although that soon changed to the possibility of RCCL taking a 30 percent, then a 19 percent share.

But it came as no big surprise when the talks eventually led nowhere.

Industry observers wondered where RCCL would get all the money to buy all or a major share of Costa. After all, RCCL has been working hard just to reduce its debt here so it can produce the quarterly net earnings Wall Street demands.

Secondly, while both companies are strong in their respective areas, there also seemed to be tremendous overlap. If Costa were to sell RCCL in Europe, wouldn’t the Italian line be sending its own potential customers away? And wouldn’t the same be true for RCCL here? Wouldn’t’ every passenger it would sell for Costa be one less for RCCL’s own ships?

Firm Commitment

Despite this latest roadblock, RCCL remains committed to developing its share of the European cruise market, said McLeod “by pursuing other opportunities.”

One way, McLeod noted, is the positioning of the newly arrived Splendour of the Seas in Europe for her inaugural season.

The rationale behind this move, McLeod said, is to “introduce new people in Europe to our style of cruising.” He added that many Europeans still bold misperceptions that “cause those (misperceptions) held by North Americans to pale in comparison.”

Presently, RCCL has three European offices in London, Oslo and Frankfurt. The line also employs about eight international representatives whom McLeod labels as “more than GSAs… they are extensions of Royal Caribbean.”

According to McLeod, about 13 percent of RCCL’s total business, or about 100,000 passengers, comes from outside of the U.S. and Canada.

“We chart an international growth of about 30 percent per year and we’re not dumping prices,” McLeod said.

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