Concerns over possible overcapacity at a time when the cruise industry as a whole and Royal Caribbean Cruises, Ltd (RCCL), the world’s second largest cruise shipping group, itself are both experiencing strong supply growth miss an important point, said Richard Fain, Chairman and CEO of the Miami based company.
There are a total of 125 cruise ships on order, according to Shippax Info, a Swedish cruise and ferry business publication.
Speaking at a conference call on 25 July, when the company unveiled its second quarter interim results, Fain said that instead of overcapacity, people should talk about supply/demand balance.
“Overcapacity implies static demand and variable supply. But the opposite is true,” he said. While a hotel operator in Dallas, Texas, can only grow its business by trying to grab a larger slice of the market there, the cruise industry enjoys a far greater degree of elasticity.
Fain mentioned “Perfect Day at CoCo Cay,” a private island experience in the Bahamas as an example: the concept has attracted very strong demand that has driven prices of cruises calling here up faster than at the Caribbean programmes of the group as a whole. Yet the driver of this development has mostly come from people who have not taken a cruise before, rather than from other cruise lines.
Whereas Carnival Corporation & plc, the world’s largest cruise shipping group, recently pointed out to weakness in some of its Continental European businesses in the second quarter of its financial year to 31 May, RCCL was more optimistic. Jason Liberty, CFO, said that the group had experienced “modest violatility” from its European guests, but this had been more than offset by strong demand in North America. In the UK, bookings had accelerated at double digit percentage rate in the past three months after a slow start of the year.
RCCL increased its net income to $472.8 million in the second quarter of this year from $466.3 million in the same period last year. Operating income rose to $573.6 million from $456.9 million and total revenues to $2.81 billion from $2.34 billion, RCCL said in a statement.