NEW YORK, USA (Reuters): Royal Caribbean Cruises Ltd, the world's second-largest cruise operator, said on Tuesday it will stop paying its common stock dividend to save money as the global economic slowdown continues to hurt the travel industry.
Royal Caribbean's move follows the announcement on October 31 by main rival Carnival Corp that it would suspend its quarterly dividend amid a further slowdown in booking volumes.
On October 28, Royal Caribbean reported higher third-quarter profit but warned that bookings were down significantly in recent weeks.
"We recognize our dividend is important to many of our shareholders," said Richard Fain, chief executive of Royal Caribbean.
"However, the best way to reward all of our shareholders is to continue to position the company for future earnings growth and enhance our liquidity during this period of heightened economic and financial market volatility," Fain added.
Royal Caribbean said it paid recent quarterly dividends at 15 cents a share, totaling $130 million a year.
The company said it has made recent cost savings it estimates will save it $125 million a year and that it will continue to assess its liquidity position.
Fain said Royal Caribbean has been proactive in arranging financing commitments or government guarantees for all of its remaining ship orders.
Royal Caribbean expects these arrangements will be adequate to meet its ongoing operations and capital expenditure requirements, Fain said.
"Nonetheless, in the current economic and capital markets environment, we feel it is prudent to actively manage our liquidity profile and add to our financial flexibility," the CEO added.
Companies throughout the travel sector -- including hotel, cruise ship, theme park and gambling corporations -- have warned that their businesses have slowed or that things could get worse next year.
Consulting firm PricewaterhouseCoopers said it expected US hotel occupancy rates to fall to 58.6 percent in 2009, the lowest since 1971.
PwC expects one measure of the hotel industry's health, revenue per available room (RevPAR), to fall 5.8 percent next year, following this year's estimated 0.8 percent decline. That would be the industry's first back-to-back decline in the widely watched measure since 2001-2002.