Royal Caribbean Cruises Limited (RCCL) has achieved many
milestones over the course of its 35-year history, but there have been few
years as remarkable as 2006. Profitability soared to $663m, an increase of
39.8% over 2004/05, and revenues reached $4.9bn.

Last year was marked by cost-containment measures implemented
across the enterprise, which continue to show encouraging results. Fuel costs
remain RCCL’s most significant challenge, and the line continues to work
aggressively to mitigate their impact with purchasing efficiencies, itinerary
modifications and conservation efforts, such as the use of alternative types of
fuel and the modification of existing hardware.

One initiative beginning in early 2007 involves installing
auxiliary diesel generators on several of RCCL’s gas-turbine ships to
produce electricity more efficiently and inexpensively. That effort could save
up to $5m per year, per ship. Additionally, RCCL is replacing halogen light
bulbs on its ships with more efficient LEDs, and is upgrading much of its
on-board navigation and vessel-performance software to do an even better job of
determining the most efficient routes from one port to another.


Market demand for cruising as a holiday option continues to
strengthen and RCCL is building for the future. With that increased demand
comes the need for the steady, sustained growth of the RCCL fleet. No longer
seen as just a means of travelling, ships continue to assume a greater role in
the overall holiday experience. Today’s cruise holidaymakers are looking
for more variety and higher service levels while on board.

“Today’s cruise holidaymakers are looking for more variety and higher service levels while on board.”

Choice is the buzzword, whether referring to activities,
creature comforts such as flat-screen TVs, stateroom configurations, dining
options or trip duration. With six ships either under construction or on order,
both RCCL brands – Royal Caribbean International (RCI) and Celebrity
Cruises – are well positioned to meet the rising expectations of current
and future guests in a competitive cruise market.

The first vessel in RCI’s new Freedom class, Freedom
of the Seas, made its debut in 2006, and two additional ships in the series
have been ordered for delivery in 2007 and 2008. Freedom of the Seas
builds on RCCL’s five popular Voyager-class ships, which introduced
rock-climbing, ice-skating and its Royal Promenade of entertainment and
shopping into the cruising vernacular.

Through a series of carefully timed announcements and preview
events held throughout the year, Freedom of the Seas generated
considerable attention with its industry-first FlowRider® surfing
simulator, which allows guests to surf on board; fullsize boxing ring;
cantilevered whirlpools; H2O Zone interactive water park; and new
family-friendly stateroom configurations, which can accommodate up to 14

RCCL has also moved forward with plans to build Project
Genesis, a 5,400-guest, 220,000-tonne ship. At 1,180ft long, 154ft wide
and 240ft high, Project Genesis will give RCCL more than enough room to
create memorable attractions and amenities designed to heighten guests’
cruise experience. Energy efficiency was prioritised in the new design, with
significant modifications made in the form of the hull and in the
air-conditioning and water production and treatment systems. Project
Genesis will be delivered in autumn 2009.

Additionally, RCCL announced a new bedding programme that
will be rolled out across the fleet through May 2007. The programme, which
makes its debut on Freedom of the Seas, includes a makeover of all
48,000 berths, including new frames, mattresses, sheets, pillows, skirts and


It was also a year of major announcements for Celebrity
Cruises. Horizon left the fleet for Island Cruises, a joint venture
between RCCL and First Choice Holidays plc, one of the UK’s largest tour
operators. But, as one ship leaves the fleet, another one – or two
– joins it. Illustrating RCCL’s commitment to the growth of its
premium cruise brand, the first post-panamax ships for the Celebrity Cruises
fleet were ordered.

At 118,000 tonnes, 26,000 tonnes larger than the
brand’s Millennium-class ships, Celebrity Solstice and
Celebrity Equinox will each accommodate 2,850 guests. Both vessels will
allow RCCL to offer larger standard staterooms, a higher percentage of
verandas, and increased amenities and services. Celebrity Solstice will
make its dbut in 2008, while Celebrity Equinox will ake its maiden
voyage a year later.

RCCL’s commitment to ensuring the optimal cruise
experience and increasing efficiencies across its fleets also continues with
the refurbishment of existing ships. The lengthened and

revitalised Enchantment of the Seas added 151
additional staterooms, which now generate excellent revenues
without commensurate costs.

Its lengthening also gave the ship a dramatic new look and
exciting attractions, including four bungee trampolines and an expanded main
pool area. RCCL also announced that Celebrity Cruises’ Century
would undergo a $55m revitalisation this spring. When it emerges from a
five-week drydock in early June, it will sport 314 new verandas, 14 additional
suites, ten new staterooms and more Concierge Class staterooms, and a new
speciality restaurant.


Earning prestigious awards helps build excitement about
brands, but RCCL also remains engaged in developing innovative advertising
campaigns that promote the quality holiday experiences RCCL offers. Building on
the momentum of the successful Get Out There campaign, which has redefined
cruising as an active holiday choice, RCCL began production on a new
advertising campaign highlighting holiday experiences told from the guest
perspective. Four Create Your Own Adventure television advertisements, filmed
like home movies, are bringing viewers closer to the cruise experience by
capturing real moments guests have during an RCCL holiday.

“RCCL continued to make major strides in installing advanced wastewater purification (AWP) systems on all its ships.”

Europe continues to offer significant opportunities to grow
business. Strong demand prompted RCCL to open dedicated offices in Italy and
Spain, and the company announced that Voyager of the Seas will
make its European debut this spring. This redeployment marks the first time a
Voyager-class ship has sailed the Mediterranean and brings the total to nine
RCI and Celebrity ships in the region.

Increased demand also led to the redeployment of Legend of
the Seas to Southampton, England, for exclusive sale there. Legend of
the Seas returned to Southampton in April 2006, resuming its sailings
during the summer months to the Canary Islands and the Mediterranean. In 2007,
Navigator of the Seas will replace Legend of the Seas to become
the largest cruise ship in the UK cruise market.

Celebrity Cruises responded to a healthy overseas market by
adding Century to the European cruise mix. When the vessel re-enters
service in June after its revitalisation, Europeans will be the first to see
its new look.


RCCL continued to make major strides in installing advanced
wastewater purification (AWP) systems on all its ships, an investment that will
total $100m. While it is difficult to develop and implement such a new
technology, Six RCI and Celebrity Cruises ships have AWP systems, and the
installation across the rest of the fleet will be completed by the end of

RCCL is proud that its efforts in the environmental arena
have been recognised by others. The Port of Stockholm awarded RCI’s
Jewel of the Seas and Celebrity Cruises’ Constellation its
Environmental Life Buoy Certificate for their use of low-sulphur fuel and
technology to reduce atmospheric emissions.

Safety and security were two areas that were brought sharply
into focus during 2006. RCCL and the shipping industry faced increased scrutiny
regarding the policies and procedures in place to protect the millions of
guests and crew members who sail each year. While certain high-profile
situations have received extensive media coverage, much of which has been based
on inaccurate or misleading information, incidences of crime on board RCCL
ships remain extremely rare. However, even one occurrence is too many, so RCCL
will continue to assess and refine its policies and practices.