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Royal Caribbean reports $1.4 billion loss, but expects to be profitable for the full year 2022

In:
29 Oct 2021

Royal Caribbean Group released its third quarter 2021 financial results, which reflect a $1.3 billion loss while restarting more than half of its ships.

New Royal Caribbean health policies expected no earlier than end of September | Royal Caribbean Blog

In fact, Royal Caribbean Group was able to get two-thirds of its ships back in operation, although the Delta variant of Covid-19 delayed booking progress.

The company championed a few key statistics from the quarter before diving into its financials:

  • Over 500k guests sailed across its five brands, including Royal Caribbean International. Over 1 million passengers are expected before the year ends.
  • By the end of 2021, 50 of the 61 cruise ships in the Royal Caribbean Group should be back in service, representing almost 100% of its core itineraries and approximately 80% of worldwide capacity.
  • Sailings for 2022 are booked within historical ranges and at higher prices than 2019, even when including future cruise credits (FCCs).
  • Guest satisfaction scores and onboard spending per passenger are both at the highest levels in the Company's history.
  • The Group expects to be cash flow positive by spring and profitable for the full year 2022.
  • Constructive dialogue with the CDC leading to the end of the prescriptive CSO in January.

Third quarter results

Royal Caribbean Group posted a $1.3 billion loss for 2021, compared to a $1.3 billion loss in the third quarter of 2020.

The Company also reported Adjusted Net Loss of $(1.2) billion or $(4.91) per share for the third quarter of 2021 compared to Adjusted Net Loss of $(1.2) billion or $(5.62) per share in the prior year. The Net Loss and Adjusted Net Loss for the third quarter of 2021 are the result of the continued impact of the COVID-19 pandemic on the business.

The good news is 11 more cruise ships returned to service, which means there are now 40 cruise ships across all the Royal Caribbean Group brands operating today. This represents 65% of the fleet capacity have restarted cruises.

Royal Caribbean test cruise to Alaska should begin today | Royal Caribbean Blog

The Company also reported Adjusted Net Loss of $(1.2) billion or $(4.91) per share for the third quarter of 2021 compared to Adjusted Net Loss of $(1.2) billion or $(5.62) per share in the prior year. The Net Loss and Adjusted Net Loss for the third quarter of 2021 are the result of the continued impact of the COVID-19 pandemic on the business.

Cruise ships that operated the Group's core Caribbean, Alaska, and Europe itineraries in the third quarter achieved a load factor of 44%. Core itineraries exclude sailings during the early ramp-up period of up to four weeks and also exclude specialized itineraries implemented during the COVID period (e.g., Singapore, Cyprus). 

Total revenues per Passenger Cruise Day in the third quarter was up 12% versus record 2019 levels driven mainly by strong onboard revenue performance. 

Cruise ship plans and capacity

How to plan a cruise vacation with maximum flexibility | Royal Caribbean Blog

Royal Caribbean Group says it will move load factors up to 65-70% during the fourth quarter.  

The Group expects all ships on core itineraries in the fourth quarter will be cash flow accretive even when including start-up costs.

By the end of the year, the Group expects that 50 out of 61 ships will have returned to service, representing almost 100% of core itinerary capacity and approximately 80% of worldwide capacity. 

Royal Caribbean releases health protocols for first U.S. cruise ship sailing | Royal Caribbean Blog

The remaining ships are expected to return by the spring of 2022 and return to historical load factors in the third quarter 2022. 

They believe Mainland China cruises will resume in the spring, albeit with lower load factors.

CDC and the Conditional Sailing Order

Royal Caribbean Group highlighted the fact the U.S. Centers for Disease Control and Prevention (CDC) announced a plan to transition the Conditional Sailing Order (CSO) to a voluntary program.

Mr. Fain said of the change, "We are very pleased with the continued and constructive partnership with the CDC and the U.S. government's COVID-19 interagency group."

"This is a great example of how close collaboration between the cruise industry and the CDC results in health and safety protocols that have demonstrated cruising can be one of the safest forms of vacation," Fain continued.

Bookings

Royal Caribbean is first cruise line to restart cruises from Tampa | Royal Caribbean Blog

While the Delta variant had a negative impact on cruise bookings, Royal Caribbean Group said booking volumes have improved "significantly" since the slowdown.

The Company attracted more bookings in the third quarter compared to the second quarter.  September was particularly strong, with new bookings for 2022 sailings more than 60% higher than the monthly average during the second quarter.

Sailings for the full year 2022 are booked within historical ranges and at higher prices than 2019. 

Royal Caribbean extends ability to cancel cruise for a credit until November 30 | Royal Caribbean Blog

"As cases have come down, demand has come surging back.  Consumers are showing their resilience and desire to vacation, and the growing affinity of Royal Caribbean's leading brands, ships and crew. Although there are many uncertainties going forward regarding COVID-19, as well as cost and supply chain pressures, we continue our pathway forward and anticipate positive cash flow for the Group by spring of 2022 and generating positive earnings for the full year 2022," said Jason T. Liberty, Executive Vice President and CFO.

As of September 30, 2021, the Company had approximately $2.8 billion in customer deposits.  The comparable figure for the three brands at the same time in 2019 was $3.1 billion. This represents an improvement of about $400 million over the past quarter despite the $300 million of revenue that was recognized during the quarter.  

Approximately 35% of the customer deposit balance is related to FCCs compared to 40% in the prior quarter; a positive trend indicating new demand.  Customer deposits for second quarter 2022 forward sailings are higher than at the same time in 2019.

Questions investors are wondering ahead of Royal Caribbean Group's earnings call this week

In:
25 Oct 2021

Royal Caribbean Group has scheduled its third quarter earnings to be released on October 29th, and there are more than a few questions cruise fans have that could be answered as part of this disclosure.

A lot has happened since the last earnings call, with many more cruise ships back in service, but executives have hinted that the next phase of the restart is moving towards a sense of normalcy.  So what should we expect going forward, and what does the current situation look like?

Earnings calls are hosted by Royal Caribbean Group's top executives, and it is a combination of disclosures, prepared statements and answering questions from Wall Street analysts. 

Royal Caribbean Group will host their call at 10:00 a.m. Eastern Time, on Friday, October 29, 2021.

Royal Caribbean Group amends loans and gives them more financial flexibility | Royal Caribbean Blog

Following prepared statements by Royal Caribbean Group Chairman and CEO Richard Fain, as well as Royal Caribbean Group Chief Financial Officer Jason Liberty, executives will take questions from Wall Street analysts. Quite often this question and answer session reveals a lot about where the company is now and what to expect going forward.

I reached out to Dan Kline, lead advisor/host of 7investing Now to get a better sense of what Wall Street is thinking ahead of Royal Caribbean's call this week.

1. Revenue

Wall Street: Royal Caribbean's revenue will take years to recover | Royal Caribbean Blog

No matter which company is releasing its financials, revenue is going to be the biggest question from analysts.

Mr. Kline thinks the real question this quarter is how much did revenue grow quarter over quarter, and how much is it below the same quarter two years ago?

Wall Street expects there to be a loss, and a company losing money is not necessarily a bad thing if there are signs of progress being made. Mr. Kline's question is about determining if revenues are starting to increase again, and how that pattern matches up with pre-pandemic numbers.

Live Blogging from Freedom of the Seas - Preamble | Royal Caribbean Blog

"They are going to say future bookings are great, but at what price? I booked a room on a short Freedom of the Seas cruise for next fall at under $500," Kline noted. "If that’s typical, then they have a long way to normal."

As revenue grows, the gap between profit and loss narrows, and that means they can not only get back to making money but also pay off some of the major debts it incurred during the shutdown.

2. Debt

Royal Caribbean Group announces new $700 million loan | Royal Caribbean Blog

A major albatross around Royal Caribbean Group's neck for the foreseeable future will be the loans it took out to stay in business while all cruise ships were idle last year.

Mr. Kline wants to know on what the company will do to address that issue, "Are they working on refinancing the debt they took on during the pandemic?"

Whether paying off the loans or renegotiating the debt deals under more favorable terms, this will be an ongoing concern for investors.

3. Crew staffing

Could crew members returning be a sign Royal Caribbean is serious about cruises restarting? | Royal Caribbean Blog

More and more Royal Caribbean ships are coming back into service, so are there any issues with getting crew members back?

The faster ships get back into service, the faster revenue can increase, and Mr. Kline wondered if getting ships back up and running fully is an issue, "Are they having trouble fully staffing as they open up more ships?"

Mr. Fain said at a convention in September the goal is to get back to full capacity as early as next year, "In our core markets, we expect to be essentially there by the end of this year."

While Royal Caribbean does not divulge passenger counts or capacity limits for its ships sailing, there has been plenty of anecdotal evidence from passengers that the amount of guests onboard is going up from what it was this summer.

4. Capital projectsRoyal Caribbean will build new Royal Beach Club in Nassau, Bahamas | Royal Caribbean Blog

 

Since the restart of cruises this summer, Royal Caribbean has quietly been working on other port projects that incur costs.

A new terminal in Galveston, beach club in Nassau, and possible expansion of port facilities in Freeport are at the top of Mr. Kline's list of questions.

"I’d be curious as to anything on capital expenditures specifically the Freeport and Nassau projects as well as amping up certain ships."

How you can listen to the earnings call

Royal Caribbean Group amends loans and gives them more financial flexibility | Royal Caribbean Blog

There will be full coverage of anything intriguing that comes out of Royal Caribbean Group's third quarter 2021 earnings call on RoyalCaribbeanBlog, but if you would like to listen on your own, here's how.

The call will be available on-line at the company's investor relations website, www.rclinvestor.com.  

You will be able to listen via the link provided close to the start of the call.

Royal Caribbean Group reports $1.3 billion loss second quarter 2021 amid fast restart plans

In:
04 Aug 2021

Royal Caribbean Group reported its second quarter 2021 financial results to Wall Street, along with an update on its restart plans.

Royal Caribbean Group reported a US GAAP Net Loss for the second quarter of 2021 of $1.3 billion, which is better than where the company was last year at this time when it has a US GAAP Net Loss of $1.6 billion.

The average monthly cash burn rate for the second quarter of 2021 was approximately $330 million, slightly higher than the prior quarter as the Company returned additional ships into operation. 

While the loss is not a surprise, Royal Caribbean Group Chairman and CEO Richard Fain celebrated the quick restart plan the company has put into action, with 29 ships across its five brands, representing 42% of capacity.

By the end of of August, that number will move up to 36 ships, representing over 60% of its capacity.

"We're thrilled to be back on the water at accelerated speed in the US and elsewhere.  After 16 months of being at a virtual standstill and another painful financial result this quarter, the flywheel is clearly picking up momentum."

"Since the pandemic began, our objective has been to make our ships safer than Main Street, and today, we are proving that ambitious goal is achievable.  We are also encouraged by the booking outlook especially for 2022 and beyond."

Royal Caribbean Group expects 80% of its ships across all brands to be in service by the end of 2021.

Positive signs ahead

Royal Caribbean Group saw some good indicators for where the short-term future of cruising.

Booked load factor for 2022 is within historical ranges. Prices for 2022 are up versus a record-setting 2019, even including the dilutive impact of future cruise credits (FCCs).

Overall booking volumes have improved, and pricing remains strong. During the second quarter the Company received about 50% more new bookings compared to the first quarter with trends improving from one month to the next. By June, the Company was receiving about 90% more bookings each week when compared to the first quarter with improvements of a similar magnitude for both 2021 and 2022 sailings.

In addition, customer deposits increased from last quarter by $530 million to now account for $2.4 billion.

Royal Caribbean Group ended the second quarter with $5.0 billion of liquidity.

The company says they have seen a "very positive" response to the restart of cruising, which they see as "robust, pent-up demand for cruising."

In terms of the impact of the Delta variant, Royal Caribbean Group said it is too early to draw any definite conclusions, but they have seen, "a modest impact on closer-in bookings."

Nonetheless, they see 2022 bookings remaining very strong, especially spring and summer 2022.

Environmental initiatives

Royal Caribbean Group highlighted some of the environmental, social, and governance plans that were put into action to coincide with the company's restart plans.

Highlights of these important sustainability initiatives include:

  • Reduction in greenhouse gas emissions
  • Removal of a significant amount of single use plastics from the supply chain
  • Equipping the majority of its fleet with emissions purification systems
  • Outfitting new ships with Selective Catalytic Reduction to reduce NOx emissions
  • Reducing waste to landfill
  • Outfitting ships with Advanced Wastewater Purification
  • Introducing Global Sustainable Tourism Council certified tours.

The next generation of cruise ships will be powered by liquefied natural gas, a cleaner burning form of fuel, and fuel cell technology, which can help reduce ship emissions. 

According to Royal Caribbean Group, exploring alternative fuel solutions is a major priority. These efforts have placed Celebrity Apex, which had its maiden voyage in June, on the path to achieving the international targets of 40% reduction in carbon intensity by 2030 from a 2008 baseline.

Royal Caribbean Group has also focused on its employees in an effort to enhance their diverse and inclusive workforce, "We have also developed an active listening strategy that gives each of our employees a voice to drive meaningful change in the workplace. We believe setting our workforce up for success through initiatives that support these elements, positions our business to excel now and into the future. "

The big questions for Royal Caribbean's 2nd quarter earnings call this week

In:
02 Aug 2021

Royal Caribbean Group has its second quarter earnings scheduled for later this week, which means a good opportunity to hear more about the company's restart plans.

In addition to publishing the company's financials, a call with investors is held to go over in greater detail the second quarter 2021 financial results.

Earnings calls are hosted by Royal Caribbean Group's top executives, and it is a combination of disclosures, prepared statements and answering questions from Wall Street analysts. 

Royal Caribbean Group will host their call at 10:00 a.m. Eastern Time, Wednesday, August 4, 2021.

Executives will start the call off with prepared statements about the outlook they have for the near-term future, but the majority of the call is question and answer between Wall Street analysts and the executives. Many times, these questions are of equal interest to cruise fans as they are to investors.

To get a sense of the questions and concerns Wall Street has for Royal Caribbean, I reached out to Dan Kline, lead advisor/host of 7investing Now.

1. When will Royal Caribbean Group return to profitability?

Ever since cruises shutdown in early 2020, Royal Caribbean Group has posted losses in the billions each quarter, so when will that trend reverse itself.

While losses are still expected again this quarter, Wall Street is going to be eager to know when will the tide tern and when the company will expect to move to break even from a loss.

Mr. Kline thinks a lot of other analysts are going to be wondering the same thing, "Going into earnings, the real question is how fast can the company stop the bleeding?

"The sooner it stops losing money, the sooner it can renegotiate debt deals under more favorable terms. I'm very bullish about where Royal Caribbean will be a year from now, but getting there is going to be a challenge."

2. How much money are they making right now?

Royal Caribbean Group will certainly highlight the fact they have already number of ships back in service, but these ships are sailing at a very limited capacity.  So how much money are they making with these few ships?

While the limited capacity percentages have not been publicly divulged, anecdotally we know the ships are sailing far from full, so how profitable these sailings are can tell a lot about answering the first question.

In May 2020, Royal Caribbean Group Chief Financial Officer Jason Liberty talked about the fact the company could break even with use of fewer, but newer cruise ships, in lieu of older ships.

"For our newer ships, you need about 30 percent load factors to kind of break even. And then they skew to about 50 percent load factor on onto our older ships."

At the time, Mr. Liberty highlighted the fact their return to service does not need the entire fleet operating at full levels to break even. In fact, load factors do not need to be exceptionally high either.

3. How much Future Cruise Credit is outstanding

One of the bellwether indicators for the market has been not just cash on hand, but how much money the cruise line has in credit from guests.

Future cruise credits (FCC) is something given out when cruises are cancelled, and to get a better sense of the company's financial state, comparing the amount of cash the company has versus FCC is another common question.

4. How much new money is coming in?

Mr. Kline points out that Royal Caribbean Group has been bullish about new bookings, but how much cash is coming in versus customers redeeming those FCCs?

"Royal Caribbean keeps saying that bookings are strong, but what percentage is new money?," Mr. Kline posed while discussing the company's quarterly results.

Ideally, Wall Street wants to see as much new cash coming in.  New bookings made without FCCs demonstrates strong demand and faith in the company from customers.

"They always paint a very upbeat picture 'future bookings are strong!' but the reality is in cash flow and how much hesitancy people have in the near and mid-term. Very avid cruisers -- especially younger ones (relatively) like us were very eager to get back on board and had the information needed to feel safe, but it may take some time for the more casual public to come around."

5. Capital spending plans

Something else on investors and cruise fans radars are big ticket items for the future.

Specifically, given where things are right now, how does Royal Caribbean's financial state impact their ability to continue with projects they have outlined around the world, such as new cruise terminals, beach resorts and more.

Prior to the global health crisis, Royal Caribbean announced plans for new port projects in the Caribbean, so how will the the current situation impact capital spending?

6. Guest spending

Mr. Kline was also eager to know is average revenue per customer up on current sailings?

Before things shutdown, guest spending onboard was a major source of profitability. Guests purchasing drink packages, wifi and shore excursions were routinely announced as the reason why the company was doing so well financially.

With sailings back again, are guests still spending at that pre-shutdown pace?  Mr. Kline admitted he was not sure this kind of data would be shared, but it is something he is looking at to determine demand for cruises.

7. Delta variant

Wall Street is hyper focused on the impact the delta variant is having on every company, and without a doubt, this question will come up as well for Royal Caribbean Group.

Specifically, what impact is the Delta variant having on future bookings?

Royal Caribbean Group Chairman and CEO Richard Fain spoke about the delta variant last week in a video update, recommending concern but not hysteria, "The delta virus is spreading worrisomely in the United States, and in other countries. We should worry about the delta variant and the other variants that will inevitably follow."

"We shouldn't, though, panic."

How you can listen to the earnings call

There will be full coverage of anything intriguing that comes out of Royal Caribbean Group's second quarter 2021 earnings call right here on RoyalCaribbeanBlog, but if you would like to listen on your own, here's how.

The call will be available on-line at the company's investor relations website, www.rclinvestor.com.  

You will be able to listen via the link provided close to the start of the call.

5 really interesting financial facts from Royal Caribbean’s first quarter earnings report

In:
03 May 2021

Included in Royal Caribbean's first quarter 2021 results are the company's balance sheets, which provide insight into what happens to a company largely still shutdown.

Financial disclosures like this are rarely interesting, but I found a few noteworthy facts and figures that really stood out as interesting, and things that do not get mentioned during an earnings call or elsewhere.

Here are the most intriguing bits of information in Royal Caribbean's past quarter that I think are worth noting.

Royal Caribbean made more money on drink packages, WiFi, and excursions than cruise bookings

Prior to the cruise industry shutting down, the real source of profit for Royal Caribbean was not ticket sales, but all the extras guests would buy, and that trend still remains today.

In the first quarter, the company made $21 million on "onboard and other revenues", while selling $20 million in cruise fares. 

Compare that to the first quarter of 2020, when they sold a billion dollars in ticket revenue, and $655 million for the add-ons.

Clearly, customers really like their drink packages and onboard internet, and spend plenty before the cruise to purchase them.

Royal Caribbean lost $300 million less than last year, but made 98% less revenue

Everyone knew Royal Caribbean would lose a lot of money again this quarter, but what is amazing is how they managed to lose less money this year compared to the same time in 2020, but with significantly less revenue.

Royal Caribbean Group lost $1.1 billion in Q1 2021, while losing $1.4 billion during the same time in 2020. However, the company only made a fraction of the revenue they did in 2020.

In the first quarter this year, Royal Caribbean took in $42 million in revenue, compared to $2 billion in revenue in Q1 2020.

So how did they lose less money this year despite a gap in cash coming in?

Essentially, in the time since, Royal Caribbean has cut back on spending considerably.

In 2020, the company had an operating loss of $1.3 billion from cruise operating costs, but just $809 million for the same time this year.

Royal Caribbean Group is averaging $300 million cash burn per month.

Just over 55k guests sailed

It is easy to focus on the U.S. cruise market, but across its brands, Royal Caribbean Group still had cruises for over 55,000 passengers this quarter.

The sailings included not only Quantum of the Seas from Singapore, but also TUI Cruises and Hapag-Lloyd Cruises.

Interestingly, the statement for the quarter lists 41,209 passengers carried, but during the call with investors, Royal Caribbean Group Chief Financial Officer Jason Liberty noted the figure was 55,000.  These sheets can sometimes be prepared a few days early, and stats like this can changes slightly.

It is staggering to think about the difference in this year versus last, when 1.2 million guests sailed.  

Occupancy was at just 37% for this year, compared to 103% for last year.

The good news is many more will start to sail soon, with a total of 11 ships resuming service across all brands this summer. The tail end of Royal Caribbean Group's second quarter will include at least two new ships resuming service in June.

Lots of deposits for cruises remain

Cruises or not, people are still booking cruises and keeping their money with the company.

Mr. Liberty said the company was "very encouraged" by the customer deposit balance, which as of last week was approximately two billion dollars.

This improved balance has been disproportionately driven by new bookings versus the issuance of more future cruise credits (FCC).

Approximately 45% of Royal Caribbean Group's customer deposit balance is associated with FCCs, versus about 50% last quarter.

Royal Caribbean is still writing off the Oasis of the Seas crane accident

In searching through the filings, I was surprised to see a write off still on the books for the Oasis of the Seas crane accident from April 2019.

Under their Adjusted Net Loss calculations, one of the line items is "Oasis of the Seas incident, Grand Bahama's dry dock write-off and other incidental expenses", which is described as "Amounts includes net insurance recoveries related to the collapse of the dry dock structure at the Grand Bahama Shipyard involving Oasis of the Seas."

Any good bookkeeper knows to use your losses wisely to help offset profits, and spreading them out is not a bad idea.

In April 2019, a crane toppled over onto Oasis of the Seas while the ship was in dry dock. No passengers were onboard the ship at the time of the accident.

As a result of the accident, the cruise line found damage to the Aqua Theatre and some suites. It cancelled three scheduled sailings in order to make repairs.

Royal Caribbean reports $1.1 billion loss in first quarter of 2021

In:
29 Apr 2021

Royal Caribbean Group released its first quarter 2021 results on Thursday, along with a business update on where things stand right now related to the global health crisis.

While Royal Caribbean did lose $1.1 billion or $4.66 per share compared to US GAAP Net Loss, that is an improvement over the same time last year, when it lost $1.4 billion.

The Company also reported Adjusted Net Loss of $1.1 billion or $4.44 per share for the first quarter of 2021 compared to Adjusted Net Loss of $310.4 million or $1.48 per share in the prior year.

Royal Caribbean Group's monthly cash burn is approximately $300 million, which is slightly higher than the previously announced range driven mainly by fleet wide restart expenses and timing.

Positive outlook

The biggest difference in this quarter versus last quarter is the anticipated summer sailings that will begin as early as June.

A total of 11 ships across all of Royal Caribbean Group's brand will sail from the Caribbean and Europe, in addition to the four ships already sailing. 

The company said reaction to the new sailings has been "positive".

These cruises are taking place with adjusted passenger capacity and the enhanced health protocols developed with government and health authorities, and guidance from the Healthy Sail Panel.

Royal Caribbean Group Chairman and CEO Richard Fain also talked about the new letter from the CDC which gave a more favorable possibility of cruise ships resuming sailings from the United States this summer.

"Last night, the CDC notified us of some clarifications and amplifications of their Conditional Sail Order which addressed uncertainties and concerns we had raised," Mr. Fain said in a statement.

"They have dealt with many of these items in a constructive manner that takes into account recent advances in vaccines and medical science."

"Although this is only part of a very complex process, it encourages us that we now see a pathway to a healthy and achievable return to service, hopefully in time for an Alaskan season."

Cash outlook

With quarterly losses measured in the billions of dollars, one of the many concerns about the health of the company has been cash flow.

Royal Caribbean Group has raised approximately $12.3 billion through a combination of bond issuances, common stock offerings and other loan facilities.

Among the actions taken during the first quarter of 2021 to help include:

  • Completed a $1.5 billion equity offering at a price of $91 per share;
  • Issued $1.5 billion of 5.5% senior unsecured notes due 2028, the proceeds of which have been and will be used to repay principal on debt maturing or required to be paid in 2021 and 2022;
  • Amended its $1.0 billion term loan due April 2022 to extend the maturity date for consenting lenders by 18 months and, in connection therewith, repaid $138.5 million of principal on the facility using proceeds from the senior notes;
  • Amended its $1.55 billion revolving credit facility due October 2022 to extend the maturity date for consenting lenders by 18 months and, in connection therewith, repaid $277.6 million of principal on the facility using proceeds from the senior notes (with a corresponding reduction in commitments);
  • Completed the balance of the previously announced amendments to its export credit facilities, which in total defer $1.15 billion of principal amortization due before April 2022 and waive financial covenants through at least the end of the third quarter of 2022 and;
  • Amended the majority of its commercial bank facilities and credit card agreements to waive financial covenants through at least the end of the third quarter of 2022.

As of March 31, 2021, the Company had liquidity of approximately $5.8 billion, including $5.1 billion in cash and cash equivalents and a $0.7 billion commitment for a 364-day facility.

Bookings update

Royal Caribbean Group reports booking activity for its 2021 cruises are, "aligned with the Company's anticipated resumption of cruising."

Pricing on these bookings is higher than 2019 both including and excluding the dilutive impact of future cruise credits (FCCs).

Cumulative advance bookings for the first half of 2022 are within historical ranges and at higher prices when compared to 2019. This was achieved with minimal sales and marketing spend which the Company believes highlights a strong long-term demand for cruising.

As of March 31, 2021, the Company had approximately $1.8 billion in customer deposits, in line with its December 31, 2020 balance. Approximately 45% of the customer deposit balance is related to FCCs.

Since the suspension of guest operations on March 13, 2020, approximately 50% of the guests booked on cancelled sailings have requested cash refunds.

The big questions for Royal Caribbean's 1st quarter earnings call next week

In:
23 Apr 2021

Royal Caribbean Group has scheduled its first quarter 2021 earnings call with investors for next week. These earnings calls are some of our best opportunities as cruise fans to hear a status update from the cruise line

The purpose of the call is to provide a business update and discuss first quarter 2021 financial results.

Earnings calls are hosted by Royal Caribbean Group's top executives, and it is a combination of disclosures, prepared statements and answering questions from Wall Street analysts. 

Royal Caribbean Group will host their call at 9:00 a.m. Eastern Time, Thursday, April 29, 2021.

Executives may start off the call with some insight into where they see things headed in the near term, but the bulk of the call will be investors asking the cruise line executives about things not in the report, which may have an impact on guests as well.

As we gear up for this conference call, here are the big questions cruise fans are just as eager to know answers to as Wall Street.

Everything and anything about the CDC

You can bet a lot of questions are going to be about determining the relationship Royal Caribbean Group has with the U.S. Centers for Disease Control (CDC) and where things are (or not) headed.

While the company is slowly getting back up on its feet outside of the United States, cruises domestically remain completely shutdown and there still is no firm answer when that may change.

Investors are going to want to get a sense of when Royal Caribbean believes the stalemate of cruise ship travel may change. While it is doubtful the company will reveal any kind of top secret plan for when exactly cruises will sail again, answers from executives may shed light on what their thoughts are, and what they are hearing and seeing currently.

It remains to be seen if any of the public pressure, legislation, or lawsuits will change the CDC's authority, so in the meantime, the start of test cruises is another big question.

Up until now, there has been no indication at all by any cruise line that test cruises are on the horizon.

Test cruises are a requirement of the U.S. Centers for Disease Control (CDC)'s Conditional Sail Order to demonstrate that the new health protocols the cruise line proposes will actually work.

Test cruises are seen as an indication of progress, and the return of ships to sea for simulated voyages would be as important to the morale of the cruise industry, as it would be for satisfying the CDC's requirements.

How well are summer 2021 cruises selling?

One big chance since the last earnings call in February is Royal Caribbean has announced a number of cruise ships that will sail this summer from outside the United States.

These new sailings have been on sale for a few weeks, and with much of the company still shutdown, and likely another billion dollar loss this quarter, you can bet executives will want to highlight any positive cash flow news that they can find.

Between the new sailings going on sale, as well as pre-cruise purchases, we may get insight into how well these new summer cruises are actually selling, and what sort of demand for cruises outside the U.S. consumers have.

How strong is demand for cruises next year?

Throughout the cruise industry shutdown, there has been strong demand for cruise bookings in the coming year, and analysts will want to know if that has changed any.

A combination of pent-up demand by the public to travel once the global health crisis eases, along with veteran cruisers eager to get back onboard has bolstered cruise bookings over the course of the next few months.

Investors will likely want to know how well-booked Royal Caribbean is not only for the remainder of 2021, but into 2022 and beyond. 

The exact date cruises will resume is unknown, but being able to hit the ground running with good demand will help Royal Caribbean rebound faster.

Read more: Latest update from Richard Fain

What about Europe?

While Anthem of the Seas will sail from England this summer, the rest of the European cruise season remains in flux.

European sailings are not subject to the CDC's jurisdiction, and rival MSC Cruises announced it would resume operations with 10 ships sailing in Europe. 

MSC Cruises's plan includes three ships sailing in the Western Mediterranean, three ships sailing in the Eastern Mediterranean and four vessels deployed to Northern Europe.

With such an ambitious plan by MSC, Europe seems like a logical place for Royal Caribbean to start back up as well.

How big of a loss?

Another quarter with cruises being mostly shutdown means more than likely another big loss for the company, but how much?

On the one hand, Quantum of the Seas remains sailing in Singapore, and new bookings opened up for summer 2021 cruises in the Caribbean and Europe.

However, a handful of ships sailing will not turn a profit, so the question is going to be how much of a loss will be reported, and what kind of a positive impact did the newly released sailings have on Royal Caribbean's balance sheet.

For perspective, Royal Caribbean Group had a $1.4 billion US GAAP Net Loss in the fourth quarter 2020, and $1.3 billion loss in third quarter 2020.

A billion dollar loss sounds scary, but Wall Street won't be that surprised.  It's all relative when it comes to profits and losses, and the question is if the loss is more or less than analysts were expecting.

How you can listen to the earnings call

There will be full coverage of anything intriguing that comes out of Royal Caribbean Group's first quarter 2021 earnings call right here on RoyalCaribbeanBlog, but if you would like to listen on your own, here's how.

The call will be available on-line at the company's investor relations website, www.rclinvestor.com.  

You will be able to listen via the link provided close to the start of the call.

How Do Cruise Lines Make Money?

In:
02 Mar 2021

As we approach the one-year mark since cruises stopped sailing from North America, lines still find themselves passengerless, staffed by skeleton crews and clinging to revenue generated from bookings that haven't slowed, despite ongoing cancellations.

But booking revenue isn't enough, and parent companies of the world's most well-known brands have had to take drastic measures to avoid completely shuttering operations.

So, how do cruise lines make their money? Here, we'll take a general look at their sources of income and some of the options they have when traditional income sources dry up.

Note: Keep in mind that not all money generated is profit. Cruise lines have many expenses -- payroll, ship maintenance and upkeep, fuel, provisions, port fees and taxes, partnership fees, advertising and marketing costs -- that eat into their bottom lines.

1. Cruise Fares

For most lines, cruise fares -- the bare minimum base prices passengers pay to book cabins, with no extras -- are the main income driver. Rough estimates indicate that bookings usually account for about 75% of money brought in.

Unless a line has solo cabins available to book or there's a sale that discounts or waives single supplements, fares are based on double occupancy -- at least two people to a room.

That means when a line lists a fare for a particular cabin on a particular ship, it expects to receive double that amount when the stateroom is booked.

It's interesting to note that, although ships usually have fewer suites available than other types of accommodations, the money generated from a single suite booking can be the same as what the line makes through the booking of several less-expensive staterooms.

2. Onboard Purchases

Fares account for the majority of most cruise lines' gross income, but strong booking numbers aren't enough to keep the lines afloat without cruisers actually sailing in order to supplement fare-generated earnings with onboard spending.

These expenditures might include alcohol, alternative dining, spa treatments, casino play and Wi-Fi access, among other items that enhance the vacation experience.

Because this supplemental income is so essential, many lines have added lots of new ways for passengers to part with their cash, from arcade games and extra-fee ice cream to skydiving and escape rooms.

3. Add-ons

In addition to onboard purchases, there are plenty of cruise add-ons that passengers can book for use ashore.

Among these are shore excursions, cruise tours (including cruise line-affiliated hotels and train rides in some locations), wedding packages and transportation (such as pre- and post-cruise shuttles).

Combined with the above onboard purchases, these add-ons account for approximately 25% of cruise lines' gross income.

4. Investors and Shareholders

To keep a steady flow of cash that they can, in turn, reinvest back into their brands, publicly owned cruise line parent companies sell stocks -- small pieces of each company -- to shareholders.

On a larger scale, parent companies -- Royal Caribbean Group, Carnival Corp. and Norwegian Cruise Line Holdings, for example -- can bring on larger investors who back them financially in exchange for a substantial stake and, often, decision-making privileges.

5. Loans

Because 2020 was a year like travel has never seen, many lines' parent companies were forced to put themselves tens of billions of dollars in debt to cover operating expenses.

It's not a favorable option, but the cruise industry's recent reliance on credit has helped consumers to maintain confidence in their favorite lines, despite substantial hits that have caused cruise-relate stock prices to plummet.

6. Sales

It's not an ideal situation, but when circumstances warrant drastic action, cruise lines can sell their physical hardware -- ships, usually their oldest vessels -- to decrease operating expenses and bring in a small bit of revenue.

Sometimes those ships are sold to other lines, but often they are sent to scrapyards, where they're beached and crews dismantle them, piece by piece.

Parent companies can also resort to selling off entire fleets, along with the rights to the brand under which they sailed. We saw this happen in early 2021 when Royal Caribbean Group parted with Azamara Cruises, selling it to a private equity firm for just $201 million.

Why did Royal Caribbean's stock go up after losing a billion dollars?

In:
23 Feb 2021

Royal Caribbean Group announced it lost $1.4 billion in the fourth quarter of 2020, but its stock price jumped up by 9% and perplexed quite a few people.

How could a company that loses so much money get investors to want to buy that stock?

Many cruise fans openly wondered how this could be the case.

On the RoyalCaribbeanBlog Facebook page, a few readers were curious why Royal Caribbean's stock shot up following the announcement of the loss.

Frank Vogt wrote, "And yet their stock is up $7.88 today...I'm happy but just don't understand why it keeps going up."

Profits and losses aren't everything

The reason Royal Caribbean's stock went up after posting a big loss is a reflection of how the stock market works, and what investors look for in any company.

Dan Kline, lead advisor/host of 7investing Now, explained why stocks do not always go the way you might think based on quarterly results, "Stocks don’t always behave logically after earnings.

"Apple, for example, posted an amazing quarter and its share price went down. In the longer-term, it will go up."

Investors consider a wide range of variables and benchmarks when looking at any stock. Given the information they have access to, investors might make certain estimates on what seems reasonable and/or likely for that company to achieve.

They not only consider the profits and losses now, but also the long-term future of the stock.

Generally, analysts predict a company's earnings per share (EPS) and revenue numbers for the quarter, fiscal year, and future fiscal years.

What did Royal Caribbean do right?

Mr. Kline explains why Royal Caribbean's stock jumped, despite the loss."In the case of RCL, the loss was expected but the picture going forward looks optimistic. People are buying shares based on that optimism."

"This remains a very risky play as lots of things could prevent a return to cruising. I own some RCL and some CCL, but they are less than 2% of my portfolio combined."

Helping Royal Caribbean's cause was a bullish call with investors, where cruise line executives provided encouraging news and a positive outlook on where things are going.

Read moreRoyal Caribbean talks vaccine impact, Cruises to Europe in 2021, Cuba and more

Specifically, Royal Caribbean pointed to strong demand for cruises in 2021 and 2022, as well as imminent progress being made with the U.S. Center for Disease Control (CDC) which could lead to test cruises starting.

The amount of cruises booked for the second half of 2021, as well as 2022, was a good start.  On top of that, executives said bookings are higher than 2019 both including and excluding the dilutive impact of future cruise credits.

Mr. Kline added the company's comments gave him more confidence in the direction Royal Caribbean is going, "I think that I'm confident that RCl won't go bankrupt after what their CEO said."

"They have significant cash on hand and booking trends ae encouraging. I'm surprised that Richard Fain went out of the way to say that it had future bookings from a fair amount of new customers. I would have expected mostly returning regulars like me."

"It's still a lot of risk, but it does seem like a comeback is more possible, even likely, than it was even a few weeks ago and investors are picking that up. This is a very long-term investment, however, as the financial hole is deep."

Royal Caribbean talks vaccine impact, Cruises to Europe in 2021, Cuba and more

In:
22 Feb 2021

Royal Caribbean held an hour long meeting with Wall Street investors that touched on topics ranging from what the vaccine rollout is doing to help bookings and protocols, booking trends, Cuba cruises and much more.

Financial analysts asked Royal Caribbean Group executives a myriad of questions surrounding their near- and long-term futures that provided interesting insight into what they are seeing and expecting right now.

Here is a breakdown of some of the most interesting anecdotes to come out of the call.

Cruising in a vaccine world

One major change since the last earnings call with investors is the role of the Covid vaccine.  It has gone from theoretical to beginning widespread distribution, and it has fundamentally changed how Royal Caribbean and governments seen cruise ships restarting.

When Royal Caribbean Group produced their 74 recommendations for cruise ships to restart sailings safely, it was crafted without vaccines in mind, but the world is changing.

Royal Caribbean Group Chairman and CEO Richard Fain sees early 2021 as an interim period, where the vaccines are still relatively new.

"They're coming out amazingly quickly, but it still is going to take months to get huge numbers of people vaccinated."

Neither the cruise lines or governments have answers yet on how effective the vaccines are, and what effect they will have on the populous, but Mr. Fain is optimistic based on the results of Israel, where a speedy rollout has spurred a quick return to normalcy.

"We think that the vaccine is, of course, the ultimate weapon and the fact that it is coming out and beginning to come out so quickly and that the pace of that is growing will be a basis for a new set of of approaches."

Mr. Fain admitted no one knows yet what those new vaccine-bolstered protocols will look like.

Read moreRoyal Caribbean adds COVID-19 into cruise contract for all passengers

What will cruises in Europe be like 2021?

A lot of attention has been placed with the CDC and cruise lines in North America, but what about cruises to Europe where American regulations do not apply?

Royal Caribbean International President and CEO Michael Bayley confirmed that while their sailings in Europe are not subject to the CDC jurisdiction, he believes they will be guided by the protocols coming from either the Healthy Sail Panel, European Union, or U.K.

"We know that the operations in some of the European countries, particularly Germany, Italy, have been ongoing for the past couple of month... and those protocols that have government operations have basically been based on the Healthy Sail Panel or the CLIA member policies, and then overlaid with specific instructions by the National Health Authority."

"I think what we're going to see is very similar to what we're going to see in the United States, which is as we continue to see infections decline and vaccines increase, then we're going to move to protocols that probably are some kind of hybrid between vaccines and testing."

"We imagine that they'll be very similar to the guidelines that we'll get from the CDC."

Read moreRoyal Caribbean expecting CDC's technical instructions "any day"

Correlation between vaccine distributions & new bookings

Perhaps nothing has been more beneficial to Royal Caribbean's bottom line or overall morale than the rollout of Covid vaccines.

Mr. Bayley noted almost as soon as vaccines got approval, bookings jumped, "One of the things that we've seen really after we came out of the holidays early in January, is a proportional increase in the number of guests booking who were 65 plus, and that is continue to increase."

"Our belief is, is that 65 plus are getting vaccinated, then they're obviously becoming more comfortable with booking, and we're seeing that very much in our bookings from about January forward."

"As the vaccine spreads down into the population by age, we'll see that probably accelerate."

Royal Caribbean Group Chief Financial Officer Jason Liberty added that while experienced cruisers have been the backbone for bookings since the shutdown, there has been more recently an increase in new cruisers booking around the same timeframe Mr. Bayely talked about.

"As the vaccines are being rolled out, we're seeing that there's a pretty strong relationship to booking volumes and and vaccines."

"What we have seen more recently, though, it's not back to where it was pretty Covid, there has been an increase in first two crews coming back into the space."

"It's also building confidence that we're getting closer to the other side of this and people are beginning to realize that that travel should be here sooner rather than later."

98% of crew members in favor of getting vaccinated

Royal Caribbean recently announced it plans to get all of its crew members vaccinated, and that has overwhelmingly been met with positivity by the crew.

Mr. Bayley said Royal Caribbean sent out a survey to all of their crew members last week, which totals around 70,000 employees.

Of the 32,000 responses they got within 12 hours, 98% of all of the crew who responded they were in favor of being required to get the Covid vaccine in order to work.

"We also learned that over 4000 of our crew have already been vaccinated at home."

"I think we are very encouraged by the results."

Read moreIt looks like Royal Caribbean will vaccinate its crew members

There is at least one ship that can still go to Cuba

As soon as Royal Caribbean announced Majesty of the Seas and Empress of the Seas would be sold, there was immediate concern there would not be a ship capable of going to Cuba if that ever re-opened.

Michael Bayley was equally concerned when the news came there was a buyer.

"We do have a ship, ships, that will fit into into Cuba if that should come back."

He did not specify which vessel that was.

Read moreRoyal Caribbean sold two smaller cruise ships with enormous legacies

Will they sell more cruise ships?

Could Royal Caribbean sell more cruise ships? It depends on the opportunity.

Jason Liberty said Royal Caribbean will remain "opportunistic".

"I think we need to remember that pre-pandemic, all of these ships generated quite a bit of cash flow."

"For us typically to test on on a ship is a little bit less about the cash that we would receive; It's more strategic on whether we think this ship, whether it's in its current state or through some moderate investment, fits our brands."

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