Royal Caribbean Reports Q3 Results, Increases Guidance

Royal Caribbean Reports Q3 Results, Increases Guidance

Royal Caribbean departing from Southampton, Photo credit Spacejunkie2 (Flickr account)

Royal Caribbean Group today reported third quarter Earnings per Share of $3.65 and Adjusted EPS of $3.85 for the third quarter of 2023.

These results were better than the company’s guidance due to stronger close-in demand and further strength in onboard revenue, the company said in a press release.

The company is also increasing its full year 2023 Adjusted EPS guidance to $6.58 – $6.63, driven by strong demand and continued strength in onboard revenue.

“The strength of our brands and the acceleration of consumer spending on experiences have propelled us towards another outstanding quarter and a robust 2023,” said Jason Liberty, president and CEO, Royal Caribbean Group. “Looking ahead, we see accelerating demand as we build the business for 2024. Our booked load factors are higher than all prior years and at higher rates, further supporting our trajectory towards the Trifecta goals,”  added Liberty.  “The combination of our leading brands, the best people, and the most innovative fleet and destinations, positions us exceptionally well to deliver on a lifetime of vacation experiences while creating long-term shareholder value.”

Third Quarter 2023 Results:

• Gross Margin Yields increased 19.1% As-Reported, and Net Yields increased 16.7% in Constant-Currency (16.9% As-Reported), both compared to the third quarter of 2019.
• Gross Cruise Costs per Available Passenger Cruise Day (“APCD”) increased 14.4% As-Reported, and Net Cruise Costs (“NCC”), excluding Fuel, per APCD increased 10.3% in Constant-Currency (10.1% As-Reported), both compared to the third quarter of 2019.
• Total revenues were $4.2 billion, Net Income was $1.0 billion or $3.65 per share, Adjusted Net Income was $1.1 billion or $3.85 per share, Adjusted EBITDA was $1.7 billion.

Full Year 2023 Outlook:

• Net Yields are expected to increase 12.9% to 13.4% in Constant-Currency (12.4% to 12.9% As-Reported), compared to 2019.
• NCC, excluding Fuel, per APCD is expected to be up 7.0% to 7.5% in Constant-Currency (6.5% to 7.0% As-Reported), compared to 2019, and includes approximately 30 basis points impact due primarily to reduced APCDs on cancelled Israel and related sailings.
• Fuel pricing and foreign exchange rates are negatively impacting EPS by $0.18, compared to prior guidance. In addition, impacted sailings related to Israel deployment is expected to impact the year by approximately $0.03.
• Adjusted EPS is expected to be in the range of $6.58 to $6.63 per share.

Third Quarter 2023

The company reported Net Income for the third quarter of $1.0 billion or $3.65 per share compared to Net Income of $33.0 million or $0.13 per share for the same period in the prior year. The company also reported Adjusted Net Income of $1.1 billion or $3.85 per share for the third quarter compared to Adjusted Net Income of $65.8 million or $0.26 per share for the same period in the prior year.

Gross Margin Yields increased 19.1% As-Reported, and Net Yields increased 16.7% in Constant-Currency (16.9% As-Reported) when compared to the third quarter of 2019. Third quarter revenue across North America and Europe itineraries exceeded expectations due to better close-in demand that translated into higher load factors and pricing, as well as continued strength in onboard revenue. Load factor for the third quarter was 110%.

Gross Cruise Costs per APCD increased 14.4% As-Reported, compared to 2019. NCC, excluding Fuel, per APCD increased 10.1% As-Reported and 10.3% in Constant-Currency, compared to 2019.   Lower operating expenses, as well as favorable timing, contributed to better-than-expected costs.

Revenue Environment and 2024 Outlook

Bookings remained strong throughout the third quarter, significantly exceeding 2019 levels.  Closer-in demand for 2023 sailings exceeded expectations, contributing to higher load factors at higher prices and higher onboard revenue for the third quarter.  Consumer spending onboard, as well as pre-cruise purchases, continue to significantly exceed 2019 levels driven by greater participation at higher prices. As of September 30, 2023, the Group’s customer deposit balance was at $5.0 billion.

Demand for 2024 has continued to accelerate, with bookings significantly and consistently outpacing 2019 levels. Booked load factors and rates are higher than all prior years while the booking window has continued to extend.  The market response to the company’s new ships, existing hardware, and the expansion of Perfect Day at CocoCay, and Hideaway Beach, has been excellent and further positions the company for strong yield and earnings growth in 2024.

Fourth Quarter 2023

Net Yields are expected to be up 16.2% to 16.7% in Constant-Currency and 15.0% to 15.5% As-Reported, both compared to the fourth quarter of 2019.  Continued strong demand for the company’s vacation experiences and strength in onboard revenue contributes to increased yield expectations for the fourth quarter.

NCC, excluding Fuel, per APCD for the quarter are expected to increase 3.9% to 4.4% in Constant-Currency and 3.3% to 3.8% As-Reported, both compared to the fourth quarter of 2019.

Fuel pricing and foreign exchange rates are negatively impacting EPS by $0.15, versus previous expectations.  Impacted sailings related to Israel deployment are negatively impacting the quarter by approximately $0.03.

Based on current fuel pricing, interest and currency exchange rates and the factors detailed above, the company expects fourth quarter Adjusted EPS to be $1.05 to $1.10 per share.

“The performance of our business continues to accelerate, driven by strong demand and excellent operational execution,” said Naftali Holtz, chief financial officer at Royal Caribbean Group. “Our formula of moderate yield growth, strong cost discipline, and moderate growth of our fleet delivers a strong financial profile and enhanced margins.”

Norwegian Cruise Line Raises Onboard Prices and Posts Strong Onboard Revenue Numbers

Norwegian Cruise Line Raises Onboard Prices and Posts Strong Onboard Revenue Numbers

Onboard revenue is seen as a real-time now indicator of how guests are feeling about their financial situation right now and while onboard company ships, according to Frank Del Rio, president and CEO of Norwegian Cruise Line Holdings.

"Onboard revenue generation has continued to be impressive, even as we continue to ramp up occupancy carrying more guests across all ships and cabin classes. In the second quarter, onboard revenue per passenger cruise day was approximately 30 per cent higher than during the comparable 2019 period," he said, on the company's second-quarter earnings call.

Mark Kempa, CFO, added that the company had raised prices for "all of our offerings" onboard the ships.

"We've gotten smarter in the pre-marketing of our products, creating that sense of urgency before the consumer steps onboard," he said. "Those consumers who have a stronger propensity for presales, they also spend more, about 30% or 40% more once they're on board. So, it's a combination of all those. But the numbers are strong. We're seeing a strong consumer today, spending today's dollars. And we feel that bodes well for ourselves and the industry."

Del Rio said that pre-cruise revenue was up 50 per cent compared to 2019 levels.

"We continue to focus on enhancing our market-leading bundled offerings and increasing quality touch points with our guests starting from the time of booking to capture even more revenue pre-cruise, allowing guests to arrive on board with an ever fresher wallet, which ultimately results in higher overall spend. In fact, our pre-cruise revenue on a per passenger day basis for the second quarter of '22 is up over 50% versus 2019 levels. At a high level, guests who make pre-cruise purchases tend to spend approximately double that of guests who do not pre-book onboard activities," he said.

Onboard Revenue Up for Royal Caribbean Group

Onboard revenue is considerably up across the Royal Caribbean Group ships back in service, with guests ready to spend.

“We are also seeing pent-up demand for our onboard revenue experiences,” said Jason Liberty, CFO and executive vice president, on the company’s second-quarter earnings call.

“Guests are really enjoying our shore excursions, casinos, spas and restaurants after spending a year in isolation,” he said.

“We are also seeing an increased demand for our WiFi services as more and more consumers have the flexibility to take vacations and work remotely.”

Michael Bayley, president and CEO of the Royal Caribbean International brand, added he was incredible encourage by the spend onboard the ships that are back into operation.

“In fact, the numbers have been very impressive,” Bayley added.

Norwegian Cruise Line Onboard Revenue Up on Initial Sailings

Initial onboard revenue metrics off the Norwegian Jade's initial European cruises from Athens were very strong.

"As an indication of this top-notch service delivery, our onboard revenue on this first crew significantly exceeded our target, which was focused on 2019 actual results by over 50 per cent," said Frank Del Rio, president and CEO of Norwegian Cruise Line Holdings.

It's a sign of pent up demand, according to Del Rio, with the consumer willing to spend.

Added Mark Kempa, executive vice president and CFO: "And when you look at the spending trends of it, it was your normal areas. Shore ex was very intense, food and beverage and then casino. So it's great to see that we're seeing the trends that we're used to. Customers are willing to spend. While it's early, it is certainly very, very encouraging."

Royal’s Onboard Revenue Spike Driven by Experiences

Onboard revenue for Royal Caribbean Cruises was up significantly in the company’s first quarter, going from $602 million in 2018 to $729 million in 2019.

“Guests spend for onboard activities has continued to shift towards areas that involve experiences over buying things and this quarter was no different,” said Jason T. Liberty, CFO, Royal Caribbean Cruises.

Passengers spent an average of $69.10 (gross) per day in the first quarter compared to $62.55 a year prior.

Liberty said shore excursions and various types of packages were key in driving the onboard revenue performance.

“We saw an over the index of spend on shore excursions and products like beverage packages, internet packages and again it is more focused on the experiential stuff versus seeing more spend occur within the retail shops,” he said.

Cruise Fleet to Reach 315 Ships and $35.5 Billion in Revenue in 2016

The cruise industry will reach 315 ships this year, generating an estimated $35.5 billion in ticket and onboard revenue worldwide, up from $33.2 billion last year according to the 2016-2017 Cruise Industry News Annual Report.

The North American market will represent approximately 56 percent of the global industry in terms of passenger sourcing and revenue; Europe 27 percent, and the Asia/Pacific region 17 percent.

Year-over-year, the market shares for North America and Europe have contracted from 59 and 29 percent respectively in 2015, while the Asia/Pacific region has grown from 12 to 17 percent.

The global passenger capacity is estimated at 23.6 million this year, up from 22 million last year.

About the Annual Report:

The Cruise Industry News Annual Report is the only book of its kind, presenting the worldwide cruise industry through 2025 in 350+ pages. Statistics are independently researched. Learn more by clicking here.

The report covers everything from new ships on order to supply-and-demand scenarios from 1987 through 2021+. Plus there is a future outlook, complete growth projections for each cruise line, regional market reports, and detailed ship deployment by region and market, covering all the cruise lines. New for 2016-2017 based on customer feedback are detailed Chinese market statistics and projections.