The capacity has moved largely out of the Eastern Mediterranean, but analysts were told in a call following the release of the firm’s fourth-quarter results that demand for Europe was “still very strong, particularly from North America”.
It added that it saw industry-wide capacity growth of 5% this year, with its own [approximately] 4% aided by its policy of selling a ship roughly every year.
Overall, the Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises parent company is forecasting higher-than-expected adjusted earnings for 2017, helped by a strong start to bookings for Caribbean cruises.
Annual net income profits rose to $1.31 billion against $1.07 billion in 2015 and the company’s upbeat forecast sent its shares to more than a year high.
This was the fourth year the brand has reported double-digit percentage growth in earnings.
The results were helped by strong demand in North America, which as well as the Eastern Mediterannean, helped offset a drop in demand for Shanghai-based sailings.
Jason Liberty, Royal Caribbean’s chief financial officer, said the Caribbean, a key market for cruise operators, would account for close to 50% of total capacity this year.
For the full year, while net yields are expected to increase 4% to 6% on a constant currency basis, the company said foreign exchange and fuel prices were creating headwinds.
For next year, fuel expenses are expected to total $714 million, with 60% already hedged and Q4 2016 saw softer close-in pricing with lower onboard retail sales.
“We expect another record-breaking year,” said Richard Fain, chairman and chief executive officer, in the analysts’ call.
The company said it was optimistic about its “double-double” programme – a target of doubling the company’s 2014 earnings per share by 2017 and increasing return on invested capital to double digits.
“As we enter our double-double year we have never been so well positioned,” said Fain.
“This programme has done what it set out to do – bookings are at record levels, the preference our brands enjoy has never been stronger, we are on the cusp of investment grade ratings, our dividends are at an all-time high, costs have been well managed, and our guests’ satisfaction has never been better.”
