You’re not alone if you’re holding back on booking a cruise. Industry giant Royal Caribbean says the economic turmoil of recent weeks is spooking customers and causing a major slowdown in bookings.
“While the company’s order book remains solid, there has been a significant deterioration recently in new bookings due to economic and financial turmoil,” the company says today in a statement accompanying its third quarter earnings release.
The parent company of Royal Caribbean, Celebrity Cruises and Azamara Cruises reported record third quarter earnings of $411.9 million, or $1.92 per share, compared to $395.0 million, or $1.84 per share in 2007. But the heady profits are the result of bookings that came in long before financial markets began their roller coaster ride downward.
“While we are pleased with our third quarter results, the operating environment has changed dramatically in recent weeks,” says Richard Fain, Royal Caribbean chairman and CEO, in the statement.
The statement noted that the company’s brands had begun offering more discounts to fill ships.
“As we have seen during other challenging periods, our customers are delaying their (purchase decisions) further out,” says Brian Rice, Royal Caribbean’s chief financial officer. “It is too early to respond to this atmosphere in a systematic way, but we have attracted short term volume in the traditionally weak fourth quarter using discounts.”
Royal Caribbean says it is responding to the downturn with plans to cut $125 million in costs over the next year. The company says it will target general and administrative expenses and try to avoid cuts that would impact the passenger experience.
One bright spot for the company: Fuel costs. With oil prices plunging, Royal Caribbean expects to spend just $686 million this year on fuel — $86 million less than it was projecting just a few months ago. The company now projects it will spend $635 million in fuel for 2009 — $255 million less than it was projecting in July.