Royal Caribbean Clamps Down On Last Minute Discounts

Cruise Week

Richard Fain

Speaking from the new Anthem of the Seas on an earnings call, Royal Caribbean International CEO Richard Fain told financial analysts that the company is taking specific steps to achieve pricing integrity, with a focus on reducing last minute discounting.

Fain said the company has extended the booking curve by announcing deployments sooner, by initiating marketing efforts earlier and by enhancing yield management systems. The moves are all aimed at having fewer staterooms to fill at the last minute.

Fain then announced the steps the company is taking to reduce last minute discounts: "We have adapted policies designed specifically to deal with the last minute discounts that are so disruptive to the system. I'm referring specifically to the special discounts offered in the last days before sailing, often at significant discount. Now these may represent only a small percentage of our business but their influence is significant. They upset our most loyal customers by creating an uncertainty about the prices that they pay.

"They cause headaches for our travel agent partners who don't know what price they should rely on. And they undermine our brand image. As a result in March we adapted a new policy that we would not do any last minute discounts on bookings in North America. Depending on the type of cruise, last minute may be (defined as) 10, 20 or 30 days out, but from that point on we will hold our price at the prior level."

Fain continued: "Obviously this may cost us some bookings in the short-term and our guidance reflects that. But we believe that the long-term advantage for our brands is worth the small short-term cost. Over time we think this will lead to happier guests, happier agents and better branding. The only exception to this rule is for very short term cruises, i.e. 2-4 nights, where last minute bookings is more of a reflection of the decision process."

Regarding earnings, Royal lowered guidance. In the company's last earnings call, Royal projected a 40% increase in earnings this year. "Unfortunately, the currency markets have not cooperated and as a result of the weakness in sterling, Aussie dollars, Euros, etc, we now expect 34% earnings growth year over year; not quite 40%, but definitely not bad," Fain said.

He told analysts that there will always be ebbs and flows in the business. "We don't see this year as any different," said Fain. "Last year the story revolved around the weak Caribbean and the strong Euro. This year the Caribbean is strong, the foreign currencies are weak. When you remove the clutter, the common denominator is our performance. The fundamentals of our business are intact."

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