Royal Caribbean Cruise Lines 2004 Annual Report Download - page 5

While the outlook is bright, we still face chal-
lenges. We’re entering a period of small capac-
ity growth, which means fewer economies of
scale to absorb inflationary and other cost pres-
sures. Fuel costs, in particular, have risen dra-
matically, and we’re actively working to mitigate
their impact. Nevertheless, it’s important to
note that these costs grew from 4.5% of rev-
enue in 2002 to 5.5% in 2004 – a big increase
and incredibly frustrating; but not enough to change
our fundamental business model.
Going to New Lengths
Royal Caribbean International is literally going
to new lengths to deliver unforgettable vaca-
tion experiences. In September, we announced
that
Enchantment of the Seas will become the
third ship in our company’s history to be
lengthened and the first to be stretched in 25
years. Her new 73-foot midsection will add 151
staterooms and many new public spaces. But
after she returns to service in July, the star
attractions will be her dramatic overhanging
decks, suspension bridges, bungee trampo-
lines and interactive splash-pad water feature.
The refurbishment of Enchantment makes
tremendous sense for us from both an eco-
nomic and a strategic standpoint, since we’re
adding substantial revenue without adding
commensurate costs.
Arenovated and renamed
Empress of the Seas
(formerly Nordic Empress )received a royal wel-
come in May at our newest cruise port, Cape
Liberty, in Bayonne, N.J. And our oldest ship in the
fleet, Sovereign of the Seas ,made a dazzling
impression in December, when she was relaunched
with 62 new balcony staterooms. Her makeover
also included the addition of the Boleros Latin
lounge and the transformation of the Windjammer
Café into the Windjammer Marketplace.
Wealso announced that we will introduce the
first ship in our new Freedom class,
Freedom of
the Seas
.Carrying 3,600 guests, Freedom will
be the world’s largest cruise ship when she
arrives next year. More importantly, we believe
she’ll be the world’s most exciting and innova-
tive ship. A second Freedom-class vessel is
scheduled for delivery in 2007, and a third will
enter service in 2008.
In October, Royal Caribbean International
achieved another significant milestone: the
enrollment of the 3 millionth member of the
brand’s Crown & Anchor Society customer loy-
alty program. And, also in October, we entered
into a groundbreaking alliance with the toymak-
ROYAL CARIBBEAN CRUISES LTD. 3
The strength of the Royal Caribbean International and Celebrity Cruises
brands, as well as our innovative marketing programs, have resulted
in an exceptionally strong demand environment.