With the new year nearly upon us, Royal Caribbean is looking forward to a new year of growth and its top executive seems very optimistic for what the future holds.
Royal Caribbean Group CEO Jason Liberty took the helm of the company at the beginning of 2022 and has worked through guiding the company to rebound from the depths of the cruise industry shutdown.
There's no doubt things look better today on the company's balance sheet than a year ago, but beyond the numbers, what does he think of where things are going?
During the naming ceremony for Wonder of the Seas, Royal Caribbean Blog had an exclusive sit down interview with Mr. Liberty to get his sense of where things are today and what the future holds for the brand.
State of the Cruise Union
When asked about how he sees things at the moment, he feels confident in the sense things are returning back.
"All the assets that made us everything that made us so great pre-pandemic is all back," he started saying about the business today. "Our load factors are returning to normal, the experience is exactly what it was pre-COVID, if not even better. Our incredible crew are well trained and enthusiastic and ready to go."
In short, he sees the trajectory on the right course, "when we look at our business, whether it's corporately or by brand, everybody's accelerating."
When will Royal Caribbean order more ships?
When Mr. Liberty was the Chief Financial Officer in 2019, he told investors he regretted the company didn't spend more money on new ship orders during the financial crisis of 2008.
There is definitely regret that we have in terms of our pullback on our growth, we would all be talking about higher earnings numbers today, better return profile today, if we hadn't slowed down our growth or our investment efforts in expanding our global footprint, investing in different projects, that would have put us an even stronger position than we are today.
It seems to me given the financial slow down of today coupled with the fact Royal Caribbean Group hasn't placed any orders for new ships recently that history is repeating itself and if we can expect new ship orders soon.
One thing he mentioned was the time to build is different today.
"Back in the financial crisis, on average, it was taking about three or four years to get a ship when you ordered it, especially a ship that was not a new design. "
"The level of demand for new ships was so high that you had to order ships much further out in order to have access to those slots. So you were seeing people order ships six or seven years out."
"We have a little bit more runway here than what we had pre-pandemic or in the financial crisis."
"If you think about the Icon one's and the Icon two's, there's a little bit more breathing time for us to have to place in those orders because of that structural change pre-pandemic."
While he didn't commit to any kind of plan or reveal anything new, he did talk about the direction of growth, "we're going to grow our business over the next five years at about 6% a year."
"We have to get our footing here into 2023. But I think we want to continue to grow our fleet."
What's happening with Royal Caribbean's port projects announced before the shutdown?
Just before the cruise industry shut down in 2020, Royal Caribbean had announced plans for a number of new port projects that would provide cruise ship guests more to do while ashore.
These plans included new private islands, beach resorts, and revamping a current private island. The promise was exciting new places to spend your day while on a cruise.
Then the world had to deal with Covid-19 and those plans seemed to fall to the sidelines as Royal Caribbean struggled with an extended shutdown coupled with crippling loans to stay in business.
But what about those other projects? Are they cancelled? Still planned? And when can we expect to see them?
"Certainly we had to put a pause on some of these things... but our ambitions around Perfect Days around the world, Beach Club concepts, are still very much there."
Mr. Liberty also pointed out that construction on land can take significantly longer than you might thing. Perfect Day at CocoCay took almost seven years, as an example.
I asked Mr. Liberty if it's fair to say all the projects announced pre-pandemic were in some status of pause or moving forward, as opposed to being cancelled.
"Yeah, there's nothing that has has been canceled."
Both Mr. Liberty and Royal Caribbean International President and CEO Michael Bayley both said the new adults-only beach expansion to Perfect Day at CocoCay is slated to open towards the end of 2023.
Cruise prices in 2023
It's no secret that prices for travel are up in general, so what is Mr. Liberty's outlook on the price of a cruise and how that affects the average cruise ship passenger.
"Our customers tend to have a pretty strong personal balance sheet. They're not overly levered. And that space just in the US alone, has trillions of dollars of savings sitting there on the sidelines."
Coupled with the fact consumers are interested in experiences more so than acquiring things, along with demographic trends, he feels good about demand for a cruise vacation.
He also still believes the value of a cruise is second to none in the leisure travel market.
"The value gap between a cruise and land based vacation during the pandemic expanded quite a bit."
"As we increase our pricing, we're still at a significant value to what it would cost for you to have anything close to a similar experience on land. That's also why our pricing, what our guests are willing to spend on our ships, continue to rise because of the demographic secular trends as well as just that value gap to land based vacations."
What can we expect with Terminal G?
Last month, Royal Caribbean Group signed a deal with PortMiami to build a new Terminal G cruise terminal.
Mr. Liberty said it won't quite be on the same scale as Terminal A in PortMiami, but it will help support the company's needs, "we have a lot of ships coming online. We need infrastructure. We need to make sure the experience from from when you arrive to getting on our ships is seamless and free and has no friction inside of it."
"That commitment to us is really just our commitment to our growth that we know is coming on."