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Royal Caribbean says cruise ships should be back to full capacity by summer

In:
09 May 2022
By: 
Matt Hochberg

The days of Royal Caribbean cruise ships sailing at reduced capacity are limited.

It's no secret that the cruise industry is moving back towards normalcy with getting more ships back into service and more passengers onboard.

The only question cruise ship passengers had was when would full capacity return, and it looks like sooner than later this summer.

At last week's earnings call with investors, Royal Caribbean International President and CEO Michael Bayley said most ships should be back to full capacity again.

"And as we head towards Memorial Day weekend," Mr. Bayley explained to a Wall Street analyst during the call. "We're going to see significant percentage of our ship sailing at 100% and greater."

In fact, ships sailing at full capacity has already happened on select sailings, "we have ships now sailing at 100% and we've had ships sailing at 100% now for several weeks out of the Caribbean, into the Caribbean market and a short product."

Mr. Bayley further broke things down by saying the Oasis Class ships ship capacity has been around 80% or so.

In Royal Caribbean Group's quarterly results, the company as a whole (including Royal Caribbean, Celebrity and SilverSea) had ships  sailing in the first quarter averaging a capacity of 59%. Month-by-month, capacity generally went up with March capacity averaging 68%.

By the time Royal Caribbean gets to the third quarter of the year, they expect the entire company to be at "triple digits" in terms of capacity.

Cruise ships sailing full was the norm prior to 2020, so the experience this summer should be more familiar for long-time cruise fans.

Getting back to profitability

Not only are full cruise ships a strong sign of demand for cruising, but it's what makes the cruise industry profitable.

Royal Caribbean Group Jason Liberty recently told Barron's the threshold for a profitable sailing is when a ship gets to 90% capacity in the current conditions.

"When you get to about a 90% load factor, you start to generate profit. Historically, that line of profitability can be lower, roughly 80%. But we have a lot more debt now. "

When Royal Caribbean can start making money instead of losing money, not only is the welfare of the company accounted for, but they can start doing more expansion and re-investment.

Many projects during the pandemic were put on hold, such as ship upgrades.