Royal Caribbean profit falls 44 pct in 3Q

CHICAGO - Travelers are still vacationing, but they're spending less when they do, Royal Caribbean Cruises Ltd. said in reporting that its third-quarter profit and revenue tumbled because it deeply discounted fares.

The cruise line said its traditionally slow fourth quarter will be even worse than usual, as last-minute travelers — particularly those from Florida who account for one-fifth of the vacationers on winter Caribbean cruises — stay home to wait out the economy.

"Like many other travel companies, we saw more strength than we expected during our peak season but have been experiencing more pricing pressure on some of our traditionally softer fall season sailings," Chairman and CEO Richard D. Fain said in a statement when the results were released Tuesday.

The operator of Royal Caribbean International and Celebrity Cruises said its profit fell 44 percent for the quarter to $230.4 million, or $1.07 per share, as its revenue skidded 17 percent to $1.76 billion.

Executives tried to quell concern that reservations for tours on the company's newest flagship — the world's largest cruise ship called Oasis of the Seas, which set sail to its home port last week — have been sluggish.

Fares on the Oasis, which is five times the size of the Titanic and can accommodate nearly 6,300 passengers, are high at $1,299 to $4,829. But Royal Caribbean, which has been cutting ticket prices on other cruises like others in the industry, has not discounted voyages on the Oasis — even if that means sailing with empty berths.

"We're not prepared to engage in some of the discounting tactics that we see in the cruise space these days," Royal Caribbean International President & CEO Adam Goldstein told investors during a conference call. "So it is possible that we will have a slightly lower load factor in the end than we might otherwise have had if we were more aggressive."

Royal Caribbean trumped Wall Street expectations for its third-quarter profit and said reservations began picking up in mid-September — at least in comparison with the low levels of last year as the recession began.

Analysts polled by Thomson Reuters on average forecast that Royal Caribbean, based in Miami, would earn $1 per share on revenue of $1.77 billion for the quarter.

Much of the stronger-than-expected third-quarter results came from an increase in reservations for trips with weeks-away departure dates.

For the rest of the year, Royal Caribbean expects to earn 70 cents per share but it said it will lose 5 cents per share in the fourth quarter. Analysts had expected the company to forecast a profit of 4 cents per share in the fourth quarter and 74 cents per share for the year.

Bernstein Research analyst Janet Brashear said in a note to investors that the company's fourth-quarter guidance was "surprisingly bad."

Royal Caribbean shares fell $1.19, or 5.8 percent, to $19.43 in midday trading Tuesday.

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