Royal Caribbean hints new ship is coming

Posted By on August 3, 2012

Could a new ship be on the way for Royal Caribbean or sister line Celebrity Cruises? The top executive of the parent company of the brands hinted as much on Thursday during a conference call with Wall Street analysts.

“We clearly are looking at that sort of thing,” Royal Caribbean Cruises chairman and CEO Richard Fain said in response to a question about whether a new ship order could come in the next few months. “I think what we’re looking at is, we see that even in this market, we could get some very attractive returns from some of our vessels that have performed well.”

Fain wouldn’t give specifics about the size of the vessel the company might order or whether it would be for the Royal Caribbean or Celebrity brand. The Royal Caribbean brand currently has 22 ships in its fleet, with two more on order for delivery in 2014 and 2015. Celebrity has 10 ships in its fleet, with one more debuting this fall.

Fain noted the company’s capacity growth has been slowing due to fewer orders in recent years.

“From 2012 through 2016, our berth capacity growth is less than 3%, and in fact, we don’t have any ship deliveries in 2013 at all,” he said. “But as we said before, we also can’t stagnate. Given the long lead time for a new vessel, we’re approaching the point where a new order could not be delivered until the middle to late 2016, by which time, we will be enjoying much better profitability and much improved credit metrics.”

At least one Wall Street analyst voiced concern over the idea of another ship order, noting the cruise industry has struggled in recent years with overcapacity in some regions such as Europe. Goldman Sachs’ Steven Kent suggested that Royal Caribbean could command higher rates if it rolled out fewer ships.

Fain responded by saying that new capacity is needed to expand into new markets. “A lot of what we are doing with our (new) capacity is shifting it to new markets, and in essence, opening up new demand,” Fain said, noting that the company this year moved one of its larger ships, the 3,114-passenger Voyager of the Seas, from Europe to Asia. “That actually brought down our capacity in the existing markets.”

Nearly two years have passed since the debut of Royal Caribbean’s latest ship, the 5,400-passenger Allure of the Seas. Along with sister Oasis of the Seas, which debuted in 2009, it is the largest cruise vessel in the world. The two additional Royal Caribbean ships on order will be somewhat smaller vessels that carry 4,100 passengers.


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