Fain: Cruise Industry Has Features That Make It Recession Resistant

Royal Caribbean Cruises is well-prepared to adapt to a changing marketplace, according to Chairman and CEO Richard Fain, speaking on the company’s second-quarter earnings call.

“When circumstances change, we are prepared to adapt. While no one is recession-proof, looking forward, I think the industry has features that make it recession-resistant,” he said. “The growing appeal of our product, the relative price attractiveness, the fixed cost component, the portability of our assets, et cetera; all of these things make us better able to do well even in bad times.

“A good example of that would be China, where Spectrum of the Seas started operating just a few weeks ago,” Fain continued. “Conventional wisdom suggests that bringing a new ship into a market whose economy is weakening ain't such a good idea. But Spectrum and our other ships there are doing very well, despite the softer economy.”

CFO Jason Liberty said that the company had plans and scenarios it would consider if the economy slowed down.

Liberty said the multi-brand cruise corporation operates a worldwide business that can source guests globally.

“We also have itineraries that go to a thousand different places,” Liberty said. “So what's available to our guest is much more.

“We also have a much stronger balance sheet and a much stronger liquidity position,” he continued. “And I think we would evaluate our plans in case there was a change in the winds.”

That being said, Liberty said the company was not seeing any of those changes whether it's booking levels, even daily, or onboard performance.

Looking back to the last recession, Liberty said there was regret that the company pulled back on its 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 in an even stronger position than we are today.”