Royal Caribbean Group smashes expectations with 2023 second quarter earnings

[smokeybandit]

Royal Caribbean Group reported its second quarter earnings on Thursday and reported stronger than expected earnings that forced the company to pump up its guidance for the year.

https://www.royalcaribbeanblog.com/2023/07/27/royal-caribbean-group-smashes-expectations-second-quarter-earnings?fbclid=IwAR0lvGhIoNHRMDqJfi0CVV9ON68erqZBSESjdUsFC2cp9TQTNb3-zPcz49s

[jticarruthers]

Glad they are doing well in their post-COVID bounceback (both as a cruiser and a stockholder) but I think its disingenuous to claim the record highs are due to demand.

It is due to record high pricing that so far has not impacted demand but likely will if/when the economy starts to move back to a more normal vibe (people not getting regular stimulus checks, paying their student loans, etc.)

As a regular cruiser who never expected to want or be able to cruise as regularly as I do the price is starting to cause me to rethink some of my options, hopefully (as a stockholder) I am wrong and the good times keep rolling but I have a hard time seeing that.

[smokeybandit]

18 minutes ago, jticarruthers said:

Glad they are doing well in their post-COVID bounceback (both as a cruiser and a stockholder) but I think its disingenuous to claim the record highs are due to demand.

It is due to record high pricing that so far has not impacted demand but likely will if/when the economy starts to move back to a more normal vibe (people not getting regular stimulus checks, paying their student loans, etc.)

As a regular cruiser who never expected to want or be able to cruise as regularly as I do the price is starting to cause me to rethink some of my options, hopefully (as a stockholder) I am wrong and the good times keep rolling but I have a hard time seeing that.

The article says they have higher bookings than 2019 and a record high deposit balance. Neither of those reflect the increase in pricing. 

[tjcruisers]

Forgot they were reporting this morning. Checked the stock and almost fell out of my chair, then remembered they were reporting.

[Xaa]

1 hour ago, jticarruthers said:

Glad they are doing well in their post-COVID bounceback (both as a cruiser and a stockholder) but I think its disingenuous to claim the record highs are due to demand.

It is due to record high pricing that so far has not impacted demand but likely will if/when the economy starts to move back to a more normal vibe (people not getting regular stimulus checks, paying their student loans, etc.)

As a regular cruiser who never expected to want or be able to cruise as regularly as I do the price is starting to cause me to rethink some of my options, hopefully (as a stockholder) I am wrong and the good times keep rolling but I have a hard time seeing that.

You generally only raise prices when demand is high.  Demand is extremely high allowing them to still completely fill ships at higher prices.

BTW, who is still getting a stimulus check?  Wasn't the last one in like 2021 and cut off based on income like the others?  I honestly don't, know we were fortunate enough to not receive any.

[jticarruthers]

1 hour ago, smokeybandit said:

The article says they have higher bookings than 2019 and a record high deposit balance. Neither of those reflect the increase in pricing. 

True, they also have several more ships active now than they did in 2019 which would reflect in higher deposit balance.

To be clear I am also not disputing that demand is also up, I was just commenting that prices being almost double is probably driving more of the record revenue and profit than the amount that demand is up.

[jticarruthers]

17 minutes ago, Xaa said:

You generally only raise prices when demand is high.  Demand is extremely high allowing them to still completely fill ships at higher prices.

BTW, who is still getting a stimulus check?  Wasn't the last one in like 2021 and cut off based on income like the others?  I honestly don't, know we were fortunate enough to not receive any.

In the same boat, never saw any stimulus but luckily didn't need any. My understanding is that a lot of the surge in travel is still being attributed to people saving their stimulus checks since they also didn't need them but were lucky enough to get them anyway and are now using them to fund travel, etc. coming out of the pandemic. Anecdotally know a couple of people in that category but perhaps that's overstated.

[WAAAYTOOO]

I wonder if the demand is going to continue at this record level.  As @jticarruthers suggested, it is possible that circumstances may disfavor cruising in the not-too-distant future.  Not only are prices soaring, but the airlines are becoming so unreliable (and expensive) that I fear fly-away cruisers are going to become discouraged and choose not to fly away for vacation.  It's just speculation.  I'm hearing (but not believing) that inflation is turning around but I don't expect any of the cruise lines to go back to the reasonable pricing UNLESS demand goes down.  Only time will tell, I guess.

[Geezer Of The Seas]

Maybe Royal will take a cue from Coca Cola Enterprises and announce they're done with product price increases in North America & Europe? Discovering consumers are starting to shy away from their products will do that, though the thought of drinking that other cola or a private label brand goes against everything I stand for. That 'other' brand's sales slipped 4.5 % last quarter, fortunately for Pepsico, the snack food business rolls merrily on; folks are just washing those chips down with something else.

[twangster]

Royal is making hay while the sun is shining.  Naturally if demand reduces so will prices.   However if demand doesn't wane, neither will prices.

The concept of supply and demand economics was not created by Royal in 2022, they are simply another example of it in action.  

To a large degree the industry has priced me out of the market but I respect the fact there is an ample supply of guests willing to pay current rates. 

Going back several years pistachios were a good price but then something happened that caused them to skyrocket in price.   I stopped buying pistachios because the value wasn't there for me but I respect the fact that there are other people that find value at a price that I don't. 

Going back several years Blue Label Scotch was a good price but then something happened that caused it to skyrocket in price.   I stopped buying Blue Label Scotch because the value wasn't there for me but I respect the fact that there are other people that find value at a price that I don't. 

These are signs of a healthy free market, in some ways capitalism working as expected.  So be it.

Go Royal Go.  Make hay while the sun is shining because none of us know what might impact the market in the future.  

And if Blue Label does come down in price I'll be happy to become a consumer once again.  

[Geezer Of The Seas]

21 minutes ago, twangster said:

Royal is making hay while the sun is shining.  Naturally if demand reduces so will prices.   However if demand doesn't wane, neither will prices.

 

A question for anyone who has cruised Royal (and other lines) longer than we have. Our first cruise in 2022, I don't recall "monthly payments with Affirm" available as a payment option when we booked the reservation. Same with Jewel sailing in November 2022, & Wonder trip in April '23 (booked August 2022, sorry NCL). 

I know Carnival has offered monthly payments at least as long as 2022 with their own financing option, but Royal, not until this year. Is this a big reason demand is what it is? Since we have never bought a cruise in this fashion, what happens if you default on a payment, cancel the trip (if that's possible)?

[instaGator]

7 minutes ago, Geezer Of The Seas said:

A question for anyone who has cruised Royal (and other lines) longer than we have. Our first cruise in 2022, I don't recall "monthly payments with Affirm" available as a payment option when we booked the reservation. Same with Jewel sailing in November 2022, & Wonder trip in April '23 (booked August 2022, sorry NCL). 

I know Carnival has offered monthly payments at least as long as 2022 with their own financing option, but Royal, not until this year. Is this a big reason demand is what it is? Since we have never bought a cruise in this fashion, what happens if you default on a payment, cancel the trip (if that's possible)?

From Royal Caribbean's perspective, using Affirm is just like purchasing a cruise with your credit card.  I don't think that the Affirm purchases are driving demand.  For some people with credit issues Affirm may make buying a cruise a little bit simpler.  Here is a little intro:   https://helpcenter.affirm.com/s/article/how-affirm-works

[smokeybandit]

I'd be curious how many actually use Affirm. I'm guessing it's a pretty low percentage.

[Ampurp85]

Demand is high and from a business standpoint I am happy for them. However, as a cruiser, I do feel a little priced out, I wasn't expecting restart prices but something akin to 2019 would be welcomed. Not only have I not been able to reprice a cruise since early 2022 but the cost of cruises booked a mere month or two ago have doubled or tripled in price. As a solo cruiser, to add another would trigger such a high increase that it's not worth it. Also, with the demand comes new cruisers who lack........a lot. Fights and children sitting on railings oh my!!

[Geezer Of The Seas]

1 hour ago, smokeybandit said:

I'd be curious how many actually use Affirm. I'm guessing it's a pretty low percentage.

More than we perhaps imagine? Especially given some of the reports of members on this forum that have recently sailed with a lot of 'first timers'. Nothing appeals to the middle class (with a family in particular) pysche more  than the words "easy monthly payments". Wouldn't personally do it, and the "finance minister" would give the idea a double 'hell no" thumbs down. The plastic is paid in full monthly now and Thank God we can do that.

But as Ampurp notes, the time may come sooner than later we'll have to find another form of amusement/recreation. Grateful for what we've managed so far though, nearly 6 thousand nautical miles traveled to countries we never dreamed of visiting, and in a manner who knew was so enjoyable, stupid human tricks and bad behavior aside.

[F1guynz]

Even though Royal says they are experiencing unprecedented demand these days I usually see plenty of high value suites still available when previously these were the first to sell out. On our Harmony sailing next year I can see at least 18 crown loft suites available, and they have gone up $7000 NZD since we booked.

[Rackham]

4 hours ago, F1guynz said:

Even though Royal says they are experiencing unprecedented demand these days I usually see plenty of high value suites still available when previously these were the first to sell out. On our Harmony sailing next year I can see at least 18 crown loft suites available, and they have gone up $7000 NZD since we booked.

I'm wondering if under Royal's financial models they've discovered they can earn more money by increasing fares across the board, leaving some cabin inventory unsold, then filling those cabins through the RoyalUp program? Now empty cabins, due to accepted RoyalUp bids, get filled through GTY bookings or another accepted RoyalUp.

[twangster]

10 hours ago, F1guynz said:

Even though Royal says they are experiencing unprecedented demand these days I usually see plenty of high value suites still available when previously these were the first to sell out. On our Harmony sailing next year I can see at least 18 crown loft suites available, and they have gone up $7000 NZD since we booked.

We have always seen Royal test the market to see what they can charge.  They know if they drop the rates they will sell so it's not a bad strategy to jack them up as a test.

[twangster]

6 hours ago, Rackham said:

I'm wondering if under Royal's financial models they've discovered they can earn more money by increasing fares across the board, leaving some cabin inventory unsold, then filling those cabins through the RoyalUp program? Now empty cabins, due to accepted RoyalUp bids, get filled through GTY bookings or another accepted RoyalUp.

Royal's fare tactics are dynamic and have been for years.  Royal uses a lot of data mining and analytics to understand market trends.  The current pricing trends are a reflection of a changing market and an example how their revenue management pricing engines are continually learning and adapting.   

In a market exhibiting strong demand they are more inclined to hold some inventory back and release it slowly so long as the trend of cruise fare increasing over time is maintained.  Open with something like 60% inventory available at X.  Hold 10% until they can sell for X * 1.2, hold 10% until they can sell for X * 1.4 and so on.   

RoyalUp is a mechanism to earn additional revenue when the conditions suit but they will always rather have new bodies booking that aren't already booked since so much revenue comes from onboard sales.  

I see balconies as the sweet spot for RU revenue as they can open up the cheapest interior and OV cabins so they can continue to advertise a cruise starting from $X where X is a low number.  There are also a lot more balconies on the largest and newest ships. 

GTY have long been a tool to fill ships.  The data mining they do allows them to know exactly how to use this tool most effectively. 

[smokeybandit]

I can't imagine RoyalUp is anything but a small supplemental revenue source. 

[AlmondFarmer]

21 hours ago, twangster said:

Going back several years pistachios were a good price but then something happened that caused them to skyrocket in price.   I stopped buying pistachios because the value wasn't there for me but I respect the fact that there are other people that find value at a price that I don't. 

Please say you switched to almonds.

[Matt]

It's incredible how well they're doing, not just by 2023 standard but by 2019 standards.

This company got shutdown for over a year and is now doing better than ever (this quarter) despite all the negative press of the past 3 years. It's impressive and it's clear they'll be able to survive all the debt they accrued (eventually).

What's even more impressive is how well-booked they are into 2024. Unlike retail, a good quarter today isn't just about what people already bought. These are customers that have invested in trips up to 2 years away, so it means built-in demand going forward.

[smokeybandit]

I think what is helping RC now is their approach to the covid protocols coming out of the restart. I think they had the most balanced protocols of all their peer cruise lines, and that gave passengers on both sides of the covid aisle a lot of confidence that may be paying dividends now.

[USFFrank]

Royal Caribbean wants to raise cruise prices even higher | Royal Caribbean Blog

I'm saddened and disappointed with this article. I don't believe it's about the debt anymore. I love cruising, and I currently have 2 cruises that I booked this past February. If I were to book these 2 cruises today 7/27/23 (promenade view cabins), the one in 2024 would be over $400 more and the one in 2025 would be over $1000 more. I know the prices can fluctuate, but I would not book either one of those cruises at today's prices. I would have liked to book an Oasis class ship for later on in 2025 when they become available later on this year, but I also have some land-based vacation ideas on the back burner. After reading this article it looks like those will be moved to the front burner.

[smokeybandit]

I'm not sure that headline is overly representative of the article though.

[Biaggio]

I’ve got 6 upcoming RCL cruises. At todays prices I couldn’t afford them. Might have to look at NCL who’s prices are lower and include add on packages.

[teddy]

For my wife and I, it’s all relative.  If we can afford to cruise on Royal Caribbean, we will.  If we can’t, then we’ll find something else to do.   We are already booked on a couple non-Royal cruises to see how we like them.  

We couldn’t afford to buy our home at its current value.   We could have in 2019.  
 

 

 

[Rackham]

What I've been noticing since starting to book with Royal in 2021, is for the first month or two fares are a good value. After that, depending on the sailing, prices start to drastically climb and the value proposition rapidly diminishes. Comparing prices between now (or several months before sailing) and when I booked for this year and next with Royal, I'm getting something akin to buy-one-get-one free pricing. Royal's initial daily fare, for the cruises I'm interested in, haven't hit a particular number yet which will get me to consider not cruising with them since there are itineraries I'm interested in and haven't done yet. However, they're slowly getting closer to this number. For many of the sailings I have booked, I wouldn't be willing to pay the current asking price as the value isn't there for what they're charging.

[Fuzzywuzzy]

You're welcome.

[smokeybandit]

43 minutes ago, Rackham said:

What I've been noticing since starting to book with Royal in 2021, is for the first month or two fares are a good value.

Now more than ever booking as early as possible can save $$$

[Ampurp85]

Royal will continue to raise prices because people will continue to pay. I see this in all facets of life. We have a restaurant that has raise prices three times in the last six months. People complain but they still eat there because the food is good. We see it from retail and groceries to housing and so on. In Royal's case some of us will get priced out, maybe change our cruising habits but there are literally billions of people in the world who can take our place. That is the crux of things: everyone's definition of value, expensive, cheap, etc. is different. 

[Carlos A.]

It's sad, but RC is quickly pricing me out.

It was fun while it lasted. 

[Geezer Of The Seas]

1 hour ago, Carlos A. said:

It's sad, but RC is quickly pricing me out.

It was fun while it lasted. 

We have 2 more booked. After the January '24 trip we will likely retreat to the sidelines, to plan/pay for something to celebrate our 50 years of a life sentence, oops, marriage in 2026.

[instaGator]

3 hours ago, smokeybandit said:

Now more than ever booking as early as possible can save $$$

I too am booking earlier than ever, and by booking with a refundable deposit like @Matt always likes to suggest, I have come to consider the refundable deposit premium as cruise price "inflation insurance".  It doesn't work for suites, but I can book a cruise at reasonable early price even if I am not sure that it will ultimately fit in my schedule.  Then as the final payment time approaches (maybe 18 months from now) I can decide if I want to keep my "inflation insurance" price or reprice as non-refundable right before final payment.  I have taken the attitude that I can't get mad about the rising prices, I just have to get more creative.

[F1guynz]

It is interesting, I enjoy cruising as I thought it offered great value for money in relation to land based tours. I actually prefer land based tours because you have so much more flexibility in destination and time spent there.

the trouble with cruising is they can only go to port destinations so itineraries are limited. If prices continue to rise I would rather do a land based holiday on a regular basis and just the odd cruise every few years.  I am not a beach person and we have already done many cruises with varied locations like the Med, Alaska, Australia, NZ, United States, Singapore.

luckily they have all these new cruisers to replace people like me if I go elsewhere.

[steverk]

I'm thrilled the Royal is doing so well. But I'm also concerned we might still be seeing hangover demand from covid times. It's a truism that the longer demand holds, the more likely it is permanent. 

As far as increased prices,  I still think the value is there, especially if you book as soon as itineraries are released.  However,  I certainly understand that some people are priced out

[twangster]

7 hours ago, steverk said:

I'm thrilled the Royal is doing so well. But I'm also concerned we might still be seeing hangover demand from covid times. It's a truism that the longer demand holds, the more likely it is permanent. 

As far as increased prices,  I still think the value is there, especially if you book as soon as itineraries are released.  However,  I certainly understand that some people are priced out

Why concerned?  As an investor?  If it is driven by a pandemic hangover then it won't be permanent.  

Nothing is permanent.  Demand pricing works both ways.  There will be some other factor at some point that reduces demand.  That's why they need to capitalize now.  

Let's face it, it's not just cruise fares that are high.  Airfare is outrageous.  Airlines CEOs are bragging that all those people who refuse to go back to a physical office are filling their airplanes.  Flights are so full the overselling practices from the past aren't working anymore.  Demand in up, prices are up.  Car rental prices are up.  The days of $14 or $21 car rental rates are over. Rates are double.

Travel is up in general.  The cruise industry is riding that wave along with the travel industry in general.    

[Traveler]

I think currently the key are with new customers which might spend more on board. More drinking packages, more special  "one time" sells, more willing to pay for activities which were free before . Also, new cruisers can not compare with  past experiences of food quality and once a day room cleaning. If there are more and more new cruisers it's OK for Royal for people not to cruise 5 times a year ...

Still, the loyal cruisers are important when things will go downhill again.

[Xaa]

16 minutes ago, Traveler said:

Also, new cruisers can not compare to past experiences of food quality and once a day room cleaning.

So true.  To the new cruiser they'll be tickled the room is cleaned once recognizing that hotels have pretty much ditched daily housekeeping service

[steverk]

3 hours ago, twangster said:

Why concerned?  As an investor?  If it is driven by a pandemic hangover then it won't be permanent.  

Good point. I guess I overstated it, but here goes.

My concern is Royal will enjoy the good times a little too much and allow their costs to get out of control.  If that happened and demand decreased,  then Royal may not be able to repay the massive debt. That would be bad for everyone.