RCCL overcoming negative media coverage of cruising, says Fain

By Jerry Limone

Despite the “unrelenting pressure of a deluge of negative publicity” on the cruise industry this year, things are looking up, said Richard Fain, chairman and CEO of Royal Caribbean Cruises Ltd.

Speaking during RCCL’s second-quarter earnings call on Thursday, Fain said the company is overcoming what he called “the CNN effect” of media scrutiny on events that have occurred this year, including fires on the Grandeur of the Seas and Carnival Triumph and the Carnival Dream stalling.

Negative coverage “clearly hurt our bookings, and unfortunately to a greater extent than we originally understood,” Fain said.

The company’s net income for the second quarter was $24.7 million, compared with a net loss of $3.7 million in the same period a year earlier.
The company managed a profit despite the Grandeur fire in May, which resulted in the cancellation of six cruises. Royal Caribbean estimated that the financial impact of the Grandeur incident was about $11 million in the second quarter (an approximate $11 million hit is expected for the third quarter, too).

An unexpected noncash charge of about $15 million also was a second-quarter setback. The charge occurred because the company needed to readjust liability in its affinity credit card program.

Still, Royal Caribbean was profitable, and Fain credited robust onboard spending, effective cost control and the performance of its largest, newest ships — the Oasis and the Allure of the Seas.

Looking ahead, Fain said that bookings for the rest of 2013 and 2014 are ahead of where Royal Caribbean was at this time last year, in terms of load factor and pricing.

The company is still dealing with the effects of negative publicity from incidents in the industry that occurred earlier this year, Fain said, including “competitive pricing.”

However, he added, “We can already see indications that [the media coverage] factor is waning, and this is most encouraging going forward.”

Addressing concerns about cruise safety, Fain said, “I think most of you understand that the recent incidents in our industry are an aberration from an otherwise exemplary safety record over many decades.”