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Royal Caribbean bookings surge, pricing strong, overshadowing Q2 loss

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Booking volumes have improved and pricing remains strong at Royal Caribbean Group, which expects to have 80% of its fleet back in service by year-end.

So far, the Delta variant has had only a modest impact on closer-in bookings. 

$1.3bn loss

The bookings strength overshadowed the company's second quarter adjusted net loss of $1.3bn, or $5.06 per share — higher than Wall Street's forecast $4.40 — and US GAAP net loss of $1.3bn, or $7.83 per share. Year-ago adjusted net loss was $1.3bn, or $6.13 per share, and US GAAP net loss of $1.6bn, or $7.83 per share.

Total revenues were $50.9m, down from $175.6m in Q1 2020.

50% more bookings

During Q2, Royal Caribbean chalked up about 50% more new bookings compared to Q1, with trends improving from one month to the next. By June, the company was receiving about 90% more bookings each week when compared to Q1, with improvements of a similar magnitude for both 2021 and 2022 sailings.

Overall, the booking activity for 2021 sailings is consistent with the company's expected capacity and occupancy ramp-up, at prices that are higher than 2019. 

As of June 30, Royal Caribbean had approximately $2.4bn in customer deposits, an increase of $530m from March 31. Approximately 40% of the customer deposit balance is related to future cruise credits; this has dropped from 45% in the prior quarter — a positive trend, indicating net new demand.

29 ships, 42% of capacity, currently operating

Already, 29 ships are operating across the group's five brands, representing 42% of capacity. By the end of this month, 36 ships should be in service, or over 60% of capacity. Yesterday, the company said it expects the full fleet to be sailing by spring 2022

'After 16 months of being at a virtual standstill and another painful financial result this quarter, the flywheel is clearly picking up momentum,' Royal Caribbean Group Chairman and CEO Richard Fain said. 'Since the pandemic began, our objective has been to make our ships safer than Main Street, and today, we are proving that ambitious goal is achievable. We are also encouraged by the booking outlook especially for 2022 and beyond.'

2022 booked load factor is within historical ranges, with sailings in the spring and summer months performing particularly well. Prices for 2022 are up versus a record-setting 2019, even including the dilutive impact of future cruise credits. 

'The surge in bookings has been extremely encouraging especially for 2022 and beyond,' Fain said. 'The return of cruising has been faster than anyone expected, and we are excited to gradually restart our presence in our key markets. We are watching the impact of the Delta variant and other likely variants, but overall, we remain optimistic in our mounting trajectory going forward. People also book their cruises long in advance, so we are concentrating on maintaining our price levels while growing our load factors.'

Returns to service

Since Royal Caribbean's last business update in April, the company has announced itineraries for 21 ships sailing by Aug. 31. This includes 12 ships from US ports. This is in addition to 15 ships previously announced sailing from ports outside the US. In total, 36 ships from five brands, or over 60% of the Royal Caribbean fleet, have either resumed sailing or been announced to resume sailing by the end of August.

EVP and CFO Jason Liberty described a 'healthy demand environment,' adding: 'We are very optimistic with our accelerated start in the United States and globally. We anticipate 80% of our fleet to be back in service by year-end ...'

Monthly cash burn

Q2's average monthly cash burn rate was approximately $330m, slightly higher than the prior quarter as additional ships resumed operations.

$5bn of liquidity

Since suspending cruises in March 2020, the group has raised approximately $13bn through a combination of bond issuances, common stock offerings and other loan facilities.

Royal Caribbean ended Q2 with $5bn of liquidity.

Elevated on-board spend

Liberty added: 'We are very encouraged by the continued pent-up demand for cruising shown by our accelerated booking trends globally and the elevated on-board spend we are seeing from our guests on current sailings.'

People are spending more on shore excursions, in casinos, spas, restaurants and on Wi-Fi.

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