Royal Caribbean released their 3rd Quarter results this morning. Here is a summary:

  • Net Income was $230.4 million ($1.07 per share). Down from $1.92 per share a year ago.
  • Last Quarter, RCI predicted 0.95 to $1.00 per share.
  • Net Yields, or rate of return, decreased by 16.5%. Last Quarters prediction was a decrease of 18%
  • Revenue was $1.8 Billion. Down from $2.1 Billion a year ago.

Here is a very interesting quote by RCI’s CEO:

“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. Overall though, the business environment is largely unchanged and stable.” –Richard Fain (source)

What I noted was that there was pressure for them to drop prices. What is troubling is that, as Mr. Fain states, the fall is a soft season. The rule of thumb is, book trips when school is in session. Prices can drop by significant amounts when comparing a trip that leaves August 15 and a trip that leaves September 15. If they were struggling with these is makes me believe two things: 1) People are just not cruising so its hard to sell cheaper cruises. or 2) RCI were just priced too high and had to lower. 

Another element to take into consideration is the Canada & New England trips. During the fall, this it traditionally the more profitable routes as it is extreamly seasonal (think September and October ONLY). There were several lines making their maiden trips on those routes, Costa Cruises and Aida Cruises; thus adding more berths to a crowded region. As quantity goes up, the price could fall. This is the case if there isn’t demand at the initial price and lines become competitive with each other.

Here’s to wishing the cruise industry a prosperous holiday season!