Royal Caribbean Cridses (RCL) gave a full-year earnings forecast of $0.70 per share on its Q3 earnings call on Nov. 3, compared to actual earnings of $2.68 per share for ‘.!e08. For Q4, RCL expects to post a loss of $0.05 per share. Due to what it called the volatility of the market, RCL would not give an earnings guidance for QI 2010 nor for the full year.

According to Chairman and CEO Richard Fain, the company is seeing more market volatility than it would like, as well as weak demand for Mexican Riviera cruises and from the Southern Florida and Spanish markets which have been hit harder by the economic downturn. In addition, RCL also has more products in so-called emerging markets than before, which also add to the uncertainty.

Shifting Focus

RCL is focused on cost discipline, international expansion and new hardware, according to Fain.

Fleetwide, the company is generating 40 percent of its passengers outside of the U.S. in 2009 and that will grow to more than 40 percent in 2010, said Adam Goldstein president and CEO of the Royal Caribbean International brand.

Goldstein said that the Rhapsody of the Seas was doing well in Australia, but that it was too early to tell how well the brand’s ships in Dubai and Asia will do. According to Goldstein, one third of the passengers on Royal Caribbean are first-time cruisers. The new Oasis and Solstice class ships are driving higher ticket prices, Fain said, noting that in 2010, the new ships will make up 18 percent of the company’s fleetwide capacity, and 50 percent by 2013.

Cumulatively bookings are running behind last year, but are expected to catch, according to RCL executives, who said they are protecting their price position on the new ships because they are aware of the tremendous value proposition.

“We always intended to reduce load factors on the first few cruises (on the Oasis),” said Goldstein. “It is possible we will have slightly lower load factors than if we had resorted to aggressive pricing.”

Goldstein added that the Oasis is generating double-digit price premiums over the Freedom class. Selling out at this point would have amounted to yield management malpractice, commented Fain. “We always have space available; that is how yield management works,” he said, responding to reports that the Oasis is not sold out for December.

Dan Hanrahan, president and CEO of the Celebrity Cruises, said that Solstice ships will represent 40 percent of the brand’s capacity next year and noted a new passenger loyalty program and Celebrity Life, an onboard program, that he said have enhanced passenger satisfaction.

Hanrahan also said half of the passengers booked on Celebrity’s longer Caribbean cruises are from outside of the U.S.

However, it is important that the new ships are not over-emphasized over the existing ships, said Fain. The bulk of revenues and earnings are still driven by the existing fleet. But when the market rebounds, he expects that the new ships will make an “enormous contribution.”

Q3

RCL has reported net income of $230.4 million, or $1.07 per share, on revenues of $1. 7 billion for the third quarter ended Sept. 30, 2009, compared to net income of $411.9 million, or $1.92 per share, on revenues of $2.0 billion for the same period last year.

The result exceeded the company’s recent guidance of $0.95 to $1.00 per share, driven primarily by the strength of close-in bookings, according to RCL.

“Like many other travel companies, we saw more strength than we expected during our peak season, but have been experiencing more pricing pressure on some of our traditionally softer fall season sailings,” said Fain. “Overall, the business environment is largely unchanged and stable. We expect the yield deficit to continue to improve in the fourth quarter and we remain optimistic that 2010 will bring year-over-year improvement.”

Q3 also benefited from better close-in bookings for Alaska and Europe, although Alaska was the weakest market and the Caribbean the strongest, said Brian Rice, executive vice president and CFO.

Fain said that the more pronounced seasonality experienced this year gave an upside in Q3, but a downside for Q4.

But RCL has not seen the economy or the market rebound yet (despite media reports that the recession is over).