Royal Caribbean executives no longer talk about recovery from the Covid pandemic.
That's because while the cruise line still has some debt it needs to pay down, it has moved past those dark days in all other ways.
CEO Jason Liberty raved about the results during his company's second-quarter earnings call.
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"We are reinstating a dividend and we are raising our full-year guidance," he said. "Less than two years ago we announced Trifecta, a three-year financial-performance program that created the pathway back to what we internally call base camp.
"I'm delighted to share that we have achieved all three Trifecta goals on a trailing 12-month basis, 18 months ahead of the schedule."
The actual goals are pretty wonky, but to simplify, Royal Caribbean has got its balance sheet in order and returned to a position of financial strength. That has enabled the company to reinstate its quarterly dividend — a move that seemed impossible to imagine during the Covid shutdown.
Liberty was rightly celebratory during the earnings call, but he also shared some insight into the future of the cruise brand.
Demand is high and prices are up
Bookings for 2024 "have consistently outpaced last year throughout the entire second quarter and into July despite the fact that we have significantly fewer staterooms left to sell, leading to higher pricing for all key products," Liberty said.
That strength is driven by the cruise line's core customer base.
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"The North American consumer, who represents approximately 80% of our sourcing this year, continues to be robust, driving strong yield growth across all key products," the executive added.
"In addition to strength in the Caribbean, European and Alaska summer itineraries are performing exceptionally well, and we have experienced greater pricing power than expected since our last earnings call, leading to increased expectations for yield growth."
Liberty added that Royal Caribbean has been capturing. "new and younger consumer bases," which are keys to growth.
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Image source: Daniel Kline/TheStreet
Royal Caribbean sees a strong economy
Liberty expressed an upbeat view of the economy and demand for cruises.
"We continue to see a very positive sentiment from our customers bolstered by a resilient economy, low unemployment, stabilizing inflation and record high household net worth," he said.
"Consumer preference continues to shift toward [spending] on experiences, with particularly prioritizing toward travel."
People have embraced the idea of traveling more.
"Consumers have 10% more vacation days compared to 2019 and they are using half of that increase to travel," he explained. "In fact, our research suggests that consumers are spending more on travel than any other leisure category and that they intend to increase their travel [spending] in the next 12 months.
"Cruise remains an attractive value proposition and cruise purchase intent is high and continues to strengthen."
Baby Boomers key to RCL's future
The changing age demographics of the U.S. population helps the cruise industry.
"The number of Baby Boomers reaching retirement age is expected to grow 30% to 73 million by 2030," Liberty said.
"Based on our research, retirees take 50% more vacation time than nonretirees. The Baby Boomer generation also holds 50% of the $156 trillion of U.S. wealth, and they are expected not only to spend more on travel, but also to transfer $7 trillion of their wealth to other generations over the next two decades, including traveling together."
The CEO said that the cruise line was seeing an increase in "real-time wealth transfer through multigenerational travel across our brands."
He says that will bring new customers to the cruise business.
"Our research shows that younger generations, Millennials and younger, are also benefiting from the 10% increase in leisure time compared to 2019 and that they intend to allocate more of this time on travel than any other leisure category," he added.
"This attractive traveler continues to gain share within our customer base at a faster pace than any other generation. And today, 1 of every 2 customers is a millennial or younger."
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Liberty's outlook is very positive.
"Their travel needs and behaviors vary across trip length and type. So the differentiated experiences offered by our incredible brands resonate extremely well with these next generations of cruisers," he said.
"Our addressable market is growing, and we are attracting more customers into our vacation ecosystem. New-to-cruise customers are up double digits versus last year, and at the same time, we are seeing stronger repeat rates."
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