Cruise lines in Alaska rebounding in bad economy

By Pat Forgey

Juneau Empire

Published: Thursday, Aug. 18 2011 2:20 p.m. MDT

In this Aug. 12, 2011, photo, passengers aboard the Holland America cruise ship Volendam watch from the railings as their ship pulls into a Juneau, Alaska harbor. More cruise lines are reporting rebounding profits for their crucial summer cruise season following the early summer report of industry leader Carnival Corp.

Juneau Empire, Michael Penn, Associated Press

Enlarge photo»

JUNEAU, Alaska — More cruise lines are reporting rebounding profits for their crucial summer cruise season following the early summer report of industry leader Carnival Corp.

The increased profits have one analyst using the term "spectacular" to describe them, though profits are not growing equally in all areas. And one of those areas might indicate trouble for Juneau's cruise-dependent businesses.

The state's second- and third-largest cruise lines, Royal Caribbean and Norwegian, report earnings later in the year than does Carnival, but include more information from the profitable Alaska cruise season.

Royal Caribbean Cruises Ltd. saw profits rise 72 percent for the quarter ended June 30, compared to the same quarter in 2010. The company said the key reasons were stronger demand for tickets, with earlier bookings enabling the company to avoid the discounting of the last few years.

It had revenues of $1.77 billion for the quarter, with an operating profit of $168 million.

Royal Caribbean Chairman and CEO Richard Fain said he was now expecting this year to be "one of the best years in our history."

The state's third largest cruise company, NCL Corp., parent of Norwegian Cruise Lines, saw a 36 percent increase in operating income, to $76 million, on revenues of $587 million. Norwegian has often lagged its more successful competitors, but its profit last quarter was even more impressive because it followed a loss for the same quarter last year.

Those two companies' results follow similar strong results from Carnival earlier.

Cruise industry analyst Assia Georgieva of Infinity Research called Royal Caribbean's results "spectacular," and credited the strong numbers company-wide to its Alaskan and Caribbean operations.

The companies don't provide specific numbers for Alaska.

Royal Caribbean executive Adam Goldstein said the strong performance in those two markets helped balance out the eastern Mediterranean, where political turmoil and fighting was hurting business.

Goldstein said the company's "yields," its profits per berth, were up about 9 percent in the Caribbean and in double digits in Alaska and northern Europe.

"The Baltic and Alaska are the clear stars this year," he said.

That's expected to continue through the summer, Goldstein said.

Goldstein said what's particularly noteworthy about Royal Caribbean's results is that the company did so well during a time of economic and political turmoil.

"When I step back and think about the economic mess we're all reading about every day, and then I look at our yield performance in the bulk of our markets like the Caribbean, Alaska and Northern Europe, et cetera, I get very excited," he said.

The company is planning further fleet additions and enhancements to continue to capitalize on that, he said.

Norwegian representatives declined comment, but in Securities and Exchange Commission filings attributed the company's better performance during the quarter to the addition of a new ship, which helped hold costs down with economies of scale, as well as rising ticket prices.

It is the third largest player in the Alaska cruise business.

One area in which each company saw little or no improvement, however, was in the "onboard and other" revenue segment. Each company saw revenues up only slightly, which given fleet increases meant passenger spending on extras such as alcohol and tours was generally stagnant or even down.

Juneau's business owners say they've been sensing that as well.

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