Main menu:

Royal Caribbean on a Roll

Written by: Paul Motter

 

11.25.2010 DW alex Royal Caribbean on a Roll
Alex from Madagascar wows the crowd
in a Royal Caribbean parade.
 Royal Caribbean on a Roll
During the sailing of Allure of the Seas I had a chance to hear CEO Richard Fain speak about the current state of the company. “I can’t believe how well things are going,” he said. “We just inaugurated Allure of the Seas, a sister ship to Oasis of the Seas, and she is selling even better than Oasis.”

Allure is getting a great deal of media attention, especially for a sister ship. She was featured on the Today Show where they had the good luck to have host Kathie Lee (Gifford), someone who “knows her ships” (after all her years as the celebrity spokesperson for Carnival), saying she couldn’t believe how great Allure is. Oprah also featured Allure as a give away to her audience on the day the ship premiered last week.

Some of you may remember that Oasis was featured on Good Morning America last year, but GMA is part of the Disney family and Royal Caribbean just launched a deal with Disney rival DreamWorks Animation, a company started by an executive (Jeffrey Katzenberg) who had a dispute with Disney that ranks among the biggest Hollywood fallouts since Ben Affleck and Jennifer Lopez.

The DreamWorks deal puts as many as 25 different characters from movies like Shrek, Madagascar, Kung Fu Panda and the new Megamind onto Royal Caribbean ships, essentially the Disney formula of bringing cartoon characters to life. These characters will appear in outdoor stage shows, an ice show and in a huge Royal Promenade parade. For what it is worth, those Royal Caribbean Royal Promenades parades have become signature cruise experiences exclusive to Royal Caribbean. Adding the “star power” of a DreamWorks character like Shrek as the celebrity grand marshal is the icing on the cake.

 

Getting back to Fain’s comments, everything he said about their company hitting on all cylinders is absolutely true, and it is no small thing, especially in this economic climate. The stock price in Royal Caribbean is in full recovery, Fain also noted with due humility. It has recovered from a low of $5 share to well over $40 now, in about 18 months. Less than two years ago many people who are supposed to be experts (Wall Street Analysts) were whispering that Royal Caribbean was in trouble. The economy had just tanked and Royal had a $1.4 billion ship (Oasis) near completion in the shipyard and they had yet to find a source of money to pay for it. They were not alone; banks worldwide had made credit tighter than Ringo’s bass drum.

For what it is worth, in a San Francisco Chronicle column by cruise expert Spud Hilton (Feb. 4, 2009) I personally recommended that people buy cruise line stocks, when Royal Caribbean was under $7 share, just for the shipboard credit the lines give to shareholders – a recommendation for which I took some heat in other cruise publications. My reasoning was that every time the cruise line stocks had gone so low they had recovered to about $50 share – and our economy has never failed to recover before.

Right after I said that Royal Caribbean stock was downgraded by the Wall Street Analysts who claim they understand the cruise business better than anyone else. Royal Caribbean also had Oasis-sister ship Allure on order (remember they couldn’t even get financing for Oasis) plus their sister company, Celebrity, had four ships on order for its new Solstice class. I held on to my shares.

 

Ironically, rival cruise line Carnival has always taken the more conservative approach to ship building. Their new ships at the time were half the size of the new Royal Caribbean ships; they were even smaller than the Celebrity ships on order. And Wall Street was giving Carnival far more credit for its cautious approach while whispering that Royal Caribbean had “bitten off more than it could chew.”

I just love it when the economic pessimists are wrong and the will of the American entrepreneurial spirit prevails. Why? Because real entrepreneurialism takes true grit and that is what Royal Caribbean showed us. Every entrepreneur needs to take chances to be a success, and my hat is off to Royal. Without such companies this country would be – well, something else.

Now, I am not knocking Carnival or its umbrella cruise lines Holland America, Princess, Cunard, Seabourn and Costa. They are also doing well now, although Carnival has been hit with a few slings and arrows lately. I am just pointing out how quickly things change. Two years ago the “experts” were saying Carnival is the smart company and Royal Caribbean was in trouble, and now they are singing exactly the opposite tune. It’s pure Monday morning quarterbacking. Where were they when you should have been buying the stock at $7? They were downgrading it.

I have listened to Wall Street analysts for years, starting in the mid-1990s when I was on the staff of Motley Fool, and I have to say that as the years go by I have less and less regard for their opinions. They are good at crunching numbers, but when it comes to forecasting where a stock will be in a year I have becoming completely deaf to them, and if I had listened I would have sold that Royal Caribbean stock I picked up at about $7.00 share at a loss. I chose to hold on.

And that is what Royal Caribbean did. The line took a huge chance in building Oasis and the Celebrity Solstice class, and now they are reaping the benefits. Guts and glory.

Discuss Allure of the Seas here.

Related posts:

  1. Why are You Picking on Royal Caribbean? I have seen and heard more negative comments about Royal...
  2. Royal Caribbean International and DreamWorks Strategic Alliance With the announcement that Royal Caribbean International and DreamWorks Animation...
  3. Royal Caribbean to Build More Ships??? Royal Caribbean said in its latest conference call that they...
  4. Inside the Cruise Business Deutsche Bank downgraded Carnival Corp. from a “Buy” to a...
  5. Cruise Sales for Carnival, NCL and Royal Caribbean The truth is, the cruise industry always experiences a doldrums...

Write a comment