Seatrade Cruise News is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

What pandemic? Royal Caribbean soars on 'no indicators of weakness'

Michael Bayley, left, and Jason Liberty
Royal Caribbean shares shot up to a three-year peak after the company trounced estimates and boosted profit guidance 33% on its ability to lift pricing without hurting demand.

RCL rose 11% Thursday morning, trading as high as $112.08. During the past 52 weeks, the stock has clocked in as low as $34.51. Market close update: Shares settled at $109.68, up 8.7%. 

With the pandemic seeming a distant memory, travelers shrugging off inflation to make up for lost time and recession fears dimming, Royal Caribbean appears firing on all cylinders.

Net yields this year are up double digits compared to a record 2019, and the company reports 'exceptionally strong' demand.

Pricing strength

Load factors are now back to normal — they reached 105% in Q2 — so the 'incredible yield growth is driven by strength in pricing and onboard spend for both new ships and like for like hardware,' Royal Caribbean President/CEO Jason Liberty said.

The key difference from May guidance is pricing and 'our ability to continue to raise price and demand continuing to come in at higher levels.' This against the backdrop of costlier land vacations and the 'value gap' between cruises and resorts.

No indicators of weakness

There are 'no indicators of weakness' in volume, ticket or onboard spending, Liberty told analysts during the company's second quarter earnings call.

The Caribbean remains the standout performer this year, but there's been strength in close-in demand for Europe with bookings by European customers accelerating. In May the company expected load factors in Europe to be a bit lighter but Liberty said demand 'came roaring back.' 

Europeans willing to spend

Europeans' willingess to spend has been 'very competitive' with the US consumer. It's just that earlier in the year, bookings from Europeans lagged by about 45 to 60 days versus the normal window.

While some economists still forecast a mild recession, Liberty said the North American consumer remains 'incredibly strong.'

Royal Caribbean's experience shows strong sentiment bolstered by strong labor markets, high wages and excess savings. Over the last few months, consumer spending on experiences (versus things) has been up 25% over 2019, according to the CEO, but that's still lower than the multi-year trend line so there's catch-up opportunity.

In Q2 the percent of customers new to brand or new to cruise 'surpassed 2019 by a wide margin' and post-cruise rebooking rates for Royal Caribbean are nearly double the 2019 level.

Liberty also reported future cruise consideration is near all-tme highs and website visits had doubled versus 2019. Two-thirds of customers are booking onboard elements prior to sailing.

Closing the gap with land vacations

Industry leaders frequently identify cruising's key challenge as closing the pricing gap with shoreside holidays.

'We've made great progress on closing the value gap with land-based vacations but the [pricing] opportunity is still there, Royal Caribbean Group CFO Naftali Holtz said.

Royal Caribbean International President/CEO Michael Bayley — who's hosting the President's Cruise aboard Allure of the Seas and said he was in his swimwear, speaking via Starlink high-speed broadband — asserted there's no gap experience-wise between ships like Icon of the Seas, Utopia of the Seas and Wonder of the Seas compared to resorts.

The Oasis-class Wonder sails from Port Canaveral, Icon is due to enter service from PortMiami in January and Utopia of the Seas will become the first Oasis-cass ship to enter service on short cruises when it begins sailing from Port Canaveral a year from now.

Short cruise strategy

Icon has 'probably broken every record in the book,' Liberty said, and Bayley called Utopia a 'big, strong game-changer' in volume and rate. He cited the strategy of combining 'outstanding hardware' with 'excellent destinations' in the short cruise market because that is 'the on-ramp for new to cruise and new to brand.'

Perfect Day at CocoCay — where the new Hideaway Beach opening in December will add capacity for 3,000 visitors a day — features on Utopia and Icon itineraries.

Bayley said the approvals for Royal Beach Club Paradise Island, Nassau are 'looking promising,' and he expects it to open in summer 2025. Utopia's itinerary includes Nassau.

China 'pretty positive'

As for Royal Caribbean's China return in April 2024 with Spectrum of the Seas from Shanghai, it's early days but 'signals look pretty positive,' Bayley said.