One on One with Royal Caribbean Chairman & CEO Richard Fain
Wednesday, June 18, 2008
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SUSIE GHARIB: Well, those high oil prices are rocking the boat at cruise ship companies like Royal Caribbean. The world's second largest cruise company expects its fuel bill to hit about $800 million this year and it's now charging customers fuel surcharges of $10 per person per day. Joining us now, Royal Caribbean Chairman and CEO Richard Fain. Mr. Fain, welcome to NIGHTLY BUSINESS REPORT.
RICHARD FAIN, CHMN. & CEO, ROYAL CARIBBEAN CRUISES: Thank you very much for having me.
GHARIB: Tell us what impact are high oil prices having on your customers and reservations for cruises?
FAIN: Well, the first and most effective thing of course it's just increasing our costs. I think the impact is both from the supplement and from the general economy. We're not doing as well as we might wish in a more normal economy, but I think it's also surprising that we've done remarkably well. We're still filling our ships. And as we said in our last earnings call, we expect to be raising our prices even today.
GHARIB: But getting to the ship is difficult, I would assume, for many customers. They have to take an airplane. We see that the airlines are raising their fares and they're cutting routes and they're charging other fees. Is that going to have an impact on your reservations?
FAIN: Well, we hope not. Obviously it makes it more difficult to travel however you're traveling and whatever you're doing for your vacation, but people really demand their vacations. It's no longer seen as a luxury. So what we're seeing is people may trade down a little bit, but people still want to take their vacations. When we look at it cruising is the best value out there. And in fact, if you take a cruise, you probably have to do less airplane travel than otherwise. So that particular point hasn't affected us as badly as the direct cost of fuel or the general state of the economy.
GHARIB: If fuel prices continue to go up, what measures do you think that you're going to have to take so that you can stay profitable?
FAIN: Well, certainly we hope it doesn't continue to go up. But we're already taking great actions. We're trying to cut our fuel costs. We're trying to -- we're operating better ships. We're operating with new types of paint, new types of energy efficient air conditioning. In fact today we just unveiled some of the more details on our Oasis flagship which has probably the most fuel efficient ship ever built. It will probably be about 25 percent less energy to drive per passenger day than anything we've seen before. So there's still conservation measures we can take. There are other cost elements we can take. And then we also have to look overseas. We're a dollar-cost company and there's an enormous potential amongst euro-based consumers and other currencies which is stronger than the dollar. So by expanding and focusing on getting more customers from abroad, we also think that will help mitigate the agony that these high fuel prices are causing.
GHARIB: You mentioned about this new cruise ship that you're going to be launching in 2009 and it's huge. It's going to be world's biggest cruise ship. Do you think you will be able to fill that ship in good times and bad?
FAIN: Absolute total confidence on that. The industry has shown its resilience and this is a spectacular ship, offering a series of amenities for our guests nobody has ever seen before and revealing the new Central Park on board the ship, the amphitheatre at sea with this spectacular like a Greek amphitheatre on a cruise ship. All these amenities we feel will attract passengers even in difficult times. I think that is something we've seen over and over again and we're hopefully we'll see it as time goes on.
GHARIB: It's sounds great and we wish you the best of luck with that venture. Thank you so much for coming on our program.
FAIN: Thanks for the interest.
GHARIB: My guest tonight Richard Fain, chairman and CEO of Royal Caribbean cruises.
