Why doesn't Royal Caribbean have to slash prices like other cruise lines?
While some cruise lines have been offering deeper discounts, Royal Caribbean is getting more bookings than ever before at higher prices.
During Royal Caribbean Group's earnings call with investors on Tuesday, executives were asked exactly that question. Why are their prices not being discounted when other cruise lines have cut their prices in the Caribbean market.
Their answer centered around the fact the product offered by competitors just doesn't measure up to what Royal Caribbean Group offers and it's the secret to why guests are willing to pay more.
In short, the better ships, destinations, and services all combine to be worth a higher price tag.
Royal Caribbean Group says it's different because of what it offers
One Wall Street analyst pointed to other cruise lines becoming more aggressive with their promotions that discount cruise fares in the Caribbean. They wanted to know Royal Caribbean Group was seeing the same kind of pricing pressure.
Jason Liberty, Royal Caribbean Group CEO, pointed out his company is in a different position.
"I think the reality for the Caribbean is... demand for differentiated assets, which we bring to the table with our ships and with our destinations, you combine that with what we've been able to do across loyalty and other technology related things, has resulted in us getting more reps out of our customers," Mr. Liberty said.
What he means is guests are choosing to sail with a Royal Caribbean Group brand because they offer something competitors don't have.
This boils down to three key differentiators for his company.
New ships are keeping eye balls on them
There are no shortage of new cruise ships, but Royal Caribbean's new ships are getting the lion share of the attention.
Executives touted the Icon Class, including the launch of Legend of the Seas this summer. They've seen a very strong response by consumers to choose this particular kind of cruise ship.
These kinds of new ships is why Mr. Liberty believes investing in new hardware and experiences compel consumers to choose Royal Caribbean, despite the prices.
Private destinations are something no one else can compete with
The fact that Royal Caribbean goes well beyond just a private beach is driving demand as well.
Royal Caribbean International President and CEO Michael Bayley said the newly opened Royal Beach Club Paradise Island has already become the company's highest-rated experience in the Bahamas.
He added that almost 4 million cruise ship passengers will visit Perfect Day at CocoCay this year. That's an incredible amount of people.
"You combine that with Perfect Day... we've got these unbelievable products that really do set Royal Caribbean apart from our competition," Mr. Bayley said.
As more beach clubs and private destinations are added, it will allow Royal Caribbean to run away with this advantage.
Customer loyalty is adding more bookings than ever
Throughout the earnings call, executives pointed to the combination of Royal Caribbean's loyalty program and technology for getting people to come back for more cruises.
Mr. Liberty said they've seen growth in repeat guests, while also attracting first-time cruisers.
They revealed more than 90% of guests now use its mobile app, which is a great sales tool for them. It recommends and personalizes upcharges that guests can buy before and during a cruise.
"More than 90% of our guests now use our app, where monthly active users have increased five fold since 2019, and more than half of our onboard revenue was purchased before embarkation," he explained.
Guests are returning more often and spend more when they do.
"Unicorn territory" Guest satisfaction scores
If you think all of this doesn't equate to bookings, the numbers don't lie.
Mr. Liberty said Royal Caribbean is achieving Net Promoter Scores in the mid-70s, which he described as "unicorn territory."
He believes creating memories with their guests builds trust, which in turn is why they want to book another cruise with a Royal Caribbean Group brand instead of shopping a vacation based on price.
"We have continued to lean in and invest in the product and in the vacation experience," Mr. Liberty said. "That is resulting in establishing incredible trust with our guests."
Bookings into next year prove their strategy is working
Not only does Royal Caribbean Group not feel compelled to discount their sailings, they are seeing very strong demand into 2027.
Even though it's still early, booking trends for 2027 are already head of historical levels. If you're holding out hope for a price drop, it doesn't look likely.
They're not looking to lure customers to book with the cheapest price.
Instead, executives believe offering the new ships, private destinations, and a really good vacation will be why people want to come back again and again.
