Consumers might be cutting back on spending in some places, but they're still spending big on cruises.
During Royal Caribbean Group's third quarter earnings call, executives were clear that while people might be looking for ways to spend less overall, they're not willing to skimp on vacation.
"Consumers continue to prioritize experiences and make room in their budgets for meaningful vacations," said Royal Caribbean Group CEO Jason Liberty as he spoke to Wall Street analysts.
While there may be-a shift in consumer behavior in everyday life, it hasn't hit vacations.
People are still spending on cruises
If someone is going to try to save money, a vacation isn't where they're looking.
The cruise giant's own research tells them that a vast majority of consumers are still spending the same on vacations as they did before.
Roughly three-quarters of consumers intend to spend the same or more on vacations over the next twelve months, a level that has remained consistent for several quarters.
Their research also shows that while consumer spending has "normalized" from the elevated levels over the past two years, "demand for experiences and leisure travel remains intact."
While the rest of the economy may have softened on overall spending, people are still spending big on their trips.
Mr. Liberty thinks this is largely due to the great value a cruise offers, "Cruising offers superior value for money versus alternative options, driven by the high-quality onboard amenities and services, pricing inclusive of meals and entertainment, and the opportunity to visit a variety of destinations with the convenience of having everything in one place."
This is evident in the extraordinary demand they've seen for the fist Celebrity river cruises, and the new Icon Class ships.
The other reason the company feels good about the future of consumer spending is because of the new offerings they have lined up.
Royal Caribbean International is on the precipice of launching a new beach club in The Bahamas, followed by two more beach clubs in 2026. Then you have Perfect Day Mexico opening in 2027.
The opportunity to try those experiences is likely going to drive demand even further, according to Royal Caribbean International President and CEO Michael Bayley.
"[Beach clubs are] also a driver for itinerary as well because we are beginning to see that itineraries that include the beach club as well as Perfect Day seem to be driving even more demand than historically, which has been really strong."
"I think we'll see that kind of combination of beach clubs really push through in onboard revenue and short excursions."
Willing to pay more
Another interesting anecdote about consumer spending is that cruisers are not only still booking, but they're willing to pay up for it.
Liberty talked about how demand is fueling cruise bookings, "As we see really strong demand and people are dreaming more and more about their vacation experiences."
"We are also seeing that translate to onboard spend. And so we are thoughtfully meeting our guests with the experiences, and they are willing to pay for them."
According to Mr. Liberty, the average cruiser has this makeup:
- Great job
- Great balance sheets (bank accounts)
- A strong desire to vacation and build experiences and memories with their friends and family
He acknowledged that they might not be willing to pay as much as they did like last year, "but they are willing to pay more."
Relying more on loyal customers
While tapping the new-to-cruise market is always going to be the primary area for sourcing business, Royal Caribbean Group is also looking to its repeat customers to cruise even more.
The company has steadily enhanced its loyalty matching program so to make it easier and more beneficial to sail on all the cruise lines owned by Royal Caribbean Group.
In 2024, status matching was introduced between the lines so a person could get an equivalent tier of loyalty status at a different line.
The move provided tangible benefits instantly to those that were loyal to one brand, but wanted to try another one.
The company then announced in its earnings call this year a new way to earn points interchangeably between the cruise lines.
Points Choice is coming early next year, and it means you can sail on Celebrity but earn Royal Caribbean points, or vice versa. This is an important change for cruisers looking to climb the loyalty ladder of one line while still being able to branch out.
Executives think it's a win-win for brand and consumer. Its aim is to generate additional sales across all of its brands while making it easier for cruisers to move up to higher loyalty tiers and their associated benefits.
