Benzinga  Aug 29  Comment 
Royal Caribbean Cruises Ltd (NYSE: RCL) is sailing higher after an upgrade. The Analyst Deutsche Bank analyst Chris Woronka upgraded Royal Caribbean from Hold to Buy and raised his price target from $135 to $146. The Thesis: June marked a...
Yahoo  Aug 23  Comment 
While Royal Caribbean's (RCL) profitability initiatives continue to drive margins, Carnival (CCL) faces lower debt amid an industry that is projected to gain in 2018.
Motley Fool  Aug 3  Comment 
After an earnings beat, Royal Caribbean gets rewarded on Wall Street.
Yahoo  Aug 1  Comment 
Royal Caribbean's (RCL) results in second-quarter 2018 are likely to be driven by higher passenger ticket as well as onboard and other revenues.
Motley Fool  Jun 26  Comment 
The good times may be over for cruise line companies.
Motley Fool  Jun 14  Comment 
Shares of the cruise-line operator moved higher after it made an acquisition.
Wall Street Journal  Jun 14  Comment 
Royal Caribbean Cruises will acquire a roughly 67% stake in privately held Silversea Cruises for about $1 billion, the company said.


Royal Caribbean Cruises is the world's second largest cruise operator by number of ships, behind leader Carnival (CCL), which operates around 90 ships. [1][2] Royal Caribbean operates nearly 40 ships and has over 92,00 berths to over 400 destinations, while carrying around 4 million passengers.[3] RCL operates its ships under the brand names Royal Caribbean International, Celebrity Cruises, Pullmantur, Azamara Cruises, and CDF Croisières de France combining to control 23.8% of the worldwide cruise market.[4]

Business Overview

Business Growth

  • Revenue: Revenue increased from $5.89 billion in 2009 to $6.74 billion in 2010.
  • Net Income: Net income increased from $162.42 million in 2009 to $547.47 million in 2010.

Business Segments

  • Royal Caribbean International: The Royal Caribbean International segment offers cruise options that appeal to the widest market in RCL's brand portfolio, ranging from the contemporary to premium customer segments. With over 20 ships and 50,000 berths, the Royal Caribbean International segment offers various cruise lengcsdvs

ths and destinations depending on the target segment.[5]

  • Celebrity Cruises: Unlike the Royal Caribbean International segment, the Celebrity Cruises segment is geared only toward RCL's premium customers. This segment has around 9 ships and nearly 17,000 berths, and features options not offered in other segments, such as live grass.[5]
  • Pullmantur: This segment exclusively services Latin American and Spanish markets and targets the contemporary customer segment.[5]
  • Azamara Cruises: The Azamara Cruises segment features only 2 ships, and is intended to serve the luxury and premium customer base of RCL. The segment's first full year of operation was 2008, and it targets the North American, U.K., Australia, and German markets.[5]
  • CDF Croisières de France: This segment specifically targets the French market and the contemporary customer base, and received its first ship, the Bleu de France, through a transfer from the Pullmantur segment.[5]
  • TUI Cruises: This segment is a joint venture with TUI AG in which RCL has a 51% stake. The segment uses one ship, which it received from Celebrity Cruises, and operates in the German contemporary and premium market.[5]

Trends & Forces

Debut of the world's largest cruise ship could boost marketability and steal market share from competitors

The launch of RCL's largest cruise ship, named the Allure of the Seas, means that RCL has command of the two largest cruise ships on the market. This could increase marketability of RCL in comparison to its competitors, and could drive customers of other cruise companies to pursue RCL instead. In addition to the launch, the company is also including a much larger variety of dining options in both of the two largest cruise ships. This could also prove to be an important differentiating point.

Demand may contradict availability of Ships

RCL has a significantly large pipeline of ships and maintains that pipeline despite any change in the economic climate. [6] For example, the worldwide economic environment between 2008 and 2009 has led to lower cruise prices and lower onboard purchases, all of which have adversely affected revenues. Growth in capacity from new ships, without an increase in the cruise industry’s share of the vacation market, could depress cruise prices and compound the ability to achieve yield improvement.

Continued financial viability of travel agents

Most of the company's sales come from travel agents who arrange cruises on behalf of clients. The travel agency business is not necessarily what it used to be. Given the emergence of internet-based travel bookings and direct to consumer models of selling airline tickets, their business in general has declined.[6] Because the company depends on a broad base of going-concern travel agents, any prolonged slump or major consolidation in the travel agency business could adversely impact the company. Furthermore, if travel agents force the company to increase commissions in order that they compete successfully, the company can see major pressures on margins. The approximate 10% commissions offered to travel agents as an industry standard is one of the company's largest variable costs.

Discretionary income and brand diversity

Cruise lines compete for the discretionary income of consumers. Cruises and vacations are discretionary purchases, luxury goods enjoyed only when income is available for spending after necessities are covered. Thus, the discretionary income levels of the company’s customer base can have a substantial effect on the company’s sales. Not surprisingly, the company operates in places like the United States and Western Europe, where the per capita discretionary income is on average higher than in many other countries. Royal Caribbean in particular offers somewhat more upscale cruises and may be even more exposed to luxury purchasers than competitor Carnival (CCL). Furthermore, RCL has fewer brands than Carnival. This provides fewer opportunities for price discrimination and demographic targeting, which could exacerbate the effect of changes in household incomes, economic activity, or consumer trends. Also, while the company continues to expand internationally, it has more modest international operations than Carnival (CCL), providing it with less exposure to some more rapidly growing markets. In short, RCL is less diversified than CCL.

Aging baby boomers

As the baby boomers continue entering retirement, the company stands to benefit from the tailwinds of an increase in senior traffic, as it derives a large percentage of its income from passengers over 55. It is likely that seniors may continue to gravitate toward warmer-weather vacations. Coupled with the fact that retirement means more time to one’s self, and for many baby boomers, time to travel, the company has significant demographic tailwinds working in its favor.

Rising oil prices and reliance on American business.

Rising oil prices have important negative effects on the company. First, one of its largest inputs is fuels for its cruise liners, so unhedged increases that cannot be passed on to customers will have a negative impact on margins. Second, high oil prices lead to lower discretionary household income, which, as discussed previously, is an important driver for the company.


The company competes against a number of smaller cruise line operators, and one significantly larger market leader.

Carnival (CCL): Carnival Cruises is the largest operator of vacation cruise ships in the world. With more than 80 cruise liners carrying over 7 million passengers worldwide, the company commands nearly half of the global cruise industry.] The company makes money from ticket sales as well as on-board revenue from gambling, shore excursions, bar revenues, and other amenities/[7]

While it does not enjoy the same magnitude of economies of scale that Carnival does, with the second largest number of ships and capacity, the company spreads much of its corporate overhead over a larger cruise liner base and has respectable margins, since it can do things like leverage size for more favorable purchases of on-board equipment and supplies. The company also competes against smaller competitors including Star Cruises (which operates Star Cruise Line and Norwegian Cruises) and Mediterranean Shipping Company (which operates MSC Cruises and Disney Cruise Line).


  1. SeekingAlpha: RCL 4th Quarter 2009 Earnings Call
  2. 2008 CCL 10-K, pg. 3
  3. Wikinvest SEC Files: RCL 2009 10-K, Item 1, Business
  4. [1]
  5. 5.0 5.1 5.2 5.3 5.4 5.5 RCL 2008 10-K, pg. 2-3
  6. 6.0 6.1 Wikinvest SEC Files: 2009 RCL 10-K, Item 1A, Risk Factors
  7. Wikinvest Stock Summary: CCL
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