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Increased demand from European, Chinese cruisers buoy firm

Royal Caribbean Cruises’ quarterly profit beat analysts’ average estimate as demand for its European and Chinese cruises increased and passengers spent more on board, helping it raise its full-year profit forecast.

Shares of the world’s second-largest cruise operator rose as much as 9.1 per cent to a life-high of $61.35.

European cruises account for 22 per cent of the capacity in the company, whose cruise lines include Royal Caribbean International, Celebrity Cruises and Azamara Club Cruise.

The company raised its full-year earnings forecast to $3.40-$3.50 per share, from $3.25-$3.45.

Royal Caribbean, which in April warned of pricing pressure in its biggest market, the Caribbean, said the environment in the region remained “promotional”. The promotional environment is said to be led by Europe-based MSC Cruises, which is offering seven-night Caribbean cruises for as low as $199.

Larger rival Carnival last month forecast an adjusted profit below market estimates for the current quarter, blaming increased competition in the Caribbean. Royal Caribbean and Carnival have been bogged down for two years by a series of adverse events such as virus outbreaks and engine fires.

Royal Caribbean is set to launch its ship, Quantum of the Seas, which features simulated skydiving, bumper cars and roller skating.

The ship, poised to make its debut in November, is already seeing “extremely strong bookings”, chief executive Richard Fain told Reuters.

“I don’t think we’ve ever had a new ship where the early bookings have been so powerful,” he said.

Royal Caribbean would also double its capacity in China from about six per cent, Fain said.

“They’re extremely confident in their numbers and this is minimal risk. They’re going to get a strong return, there’s no doubt about it,” industry analyst Stewart Chiron said about the company’s expansion plans in China. Royal Caribbean said net yields, which include ticket sales and spending on board, rose 2.6 per cent in the second quarter ended June 30, excluding the impact of currency fluctuations.

“Double-digit yield improvement on European and China sailings is helping offset a continued promotional environment in the Caribbean,” the company said.

The company’s net income rose to $137.7 million, or 62¢ per share, more than five times the $24.7 million, or 11¢ per share, it reported a year earlier.

Excluding items, the company earned 66¢ per share.

Total revenue rose five per cent to $1.98 billion.

Analysts on average had expected earnings of 52¢ per share on revenue of $1.99 billion, according to Thomson Reuters I/B/E/S.