Royal Caribbean Clamps Down On Last Minute Discounts
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
"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