Royal Caribbean’s Fain Optimistic For 2020, But Coronavirus A Wild Card

Cruise Week

Royal Caribbean Chairman/CEO Richard Fain provided calming words to the investment community regarding Wave Season bookings, but he also didn’t mince words on the potential problems involving coronavirus and the cruise business.

Cruise Week reports that Fain spoke during Royal Caribbean’s Q4 earnings call with financial analysts. During his strategic overview of the business, Fain said, "Obviously, the biggest issue of the day is the Wuhan coronavirus, and as you all know, this virus has affected over 20,000 people in China, and they have taken unprecedented steps to contain it."

Fain observed that no one knows how this outbreak will play out, and Royal Caribbean doesn't know how it will ultimately impact its business. "So far we've cancelled some sailings, and we've modified several itineraries that extend to 4MAR.

While unsure at this point of the longer-term impact of the outbreak, Royal Caribbean said it expects to take an earnings hit of 25 cents per share after cancelling eight cruises out of China because of the coronavirus outbreak.

“It seems likely that we will have to cancel more, but we don’t know how many,” Fain said during the call. “This is all very disappointing to us.”

Looking ahead, Fain says, "We continue to feel positive about and committed to the long-term growth potential in China, a market that we have been in for over 10 years."

In other areas, the news is far better. "One important bright spot is that looking beyond the current outbreak, we aren't seeing a big impact on overall bookings elsewhere," said Fain. "But again -- and here I'm sounding like a broken record -- we just don't know."

CFO Jason Liberty added, "The strength of this year's Wave makes us very optimistic about 2020."  In that vein, Royal expects yields to improve broadly in the range of 2.25% to 4.25% for 2020, though that doesn't take into account what may come out of future coronavirus impacts.

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