During the early days of the cruise industry's comeback from the covid pandemic, prices were depressed even though capacity was limited.
People were reluctant to take a cruise whIle covid still raged, even though Royal Caribbean Group (RCL), Carnival Cruise Lines (CCL), and Norwegian Cruise Line Holdings (NCLH) required vaccinations and pre-cruise testing. In some cases, people were worried about getting sick while others simply did not want to pay for a cruise until cruises returned to normal.
And, of course, the rules set by the Centers for Disease Control (CDC) kept some people from cruising. People who weren't vaccinated or who had issues proving that they were vaccinated were basically banned from sailing. In addition, some people opted out because they did not want to wear masks onboard, get their kids vaccinated, or deal with any sort of inconvenience.
That led to depressed demand for cruising which kept prices down. Ships were not sailing full due to social distancing requirements but consumers were either reticent to sail or unable to meet the requirements. It was a perfect storm for customers who were willing/able to abide by the rules when many sailings could be booked at prices well below historical norms.
Those days of low prices and cheap cruises may be over, according to comments made by Royal Caribbean Group CEO Jason Liberty during the cruise line's fourth-quarter earnings call.
Image source: Daniel Kline, TheStreet
Royal Caribbean Has Seen Cruise Prices Go Up
"We are seeing particularly strong booking trends for North American-based sailings, which account for nearly 70% of our capacity this year," Liberty said. "From a cumulative standpoint, these itineraries are now booked at the same load factor as they were in 2019 and at higher prices. Our 2023 European sailings are booked within historical ranges at better rates with recent bookings outpacing 2019 levels."
CFO Naftali Holtz made it clear that the increased prices had already started to take hold in the fourth quarter.
"Fourth-quarter outperformance was a result of continued strong demand for our brands' vacation experiences, strong close-in bookings at higher prices, and continued strength of onboard revenue," he shared.
Liberty made it clear that the traditional cruise booking pattern where prices go up on a sailing as rooms begin to fill up has returned.
"I think the other thing that has been -- that we've seen through the course of this Wave is our ability to raise prices at the same time. So, the demand is that strong, and we're able to raise price across these different products and really not seeing a pullback from the consumer as we continue to do so," he said.
The CEO made it clear why this has happened.
"And that is really a reflection of what we've seen since our last earnings call, or really since the announcement of the protocol being dropped, just acceleration and the propensity to cruise across all three categories of new-to-cruise, first-to-brand, first-to-cruise has returned," he added.
Royal Caribbean's CocoCay, Onboard Prices Are Up Too
It's not just cruise fares that have gone up, Royal Caribbean has seen passengers be willing to pay more for cruise add-ons as well. That's something Royal Caribbean President Michael Bayley commented on during the call.
"When we first started coming out of the pandemic and we saw this really strong robust onboard spend, we wondered how long it would last for. And we had different theories about that," he said. "It's just continued to strengthen...And we just continue to see incredible strength with the onboard spend, and the number continues to improve."
Bayley also made it clear that prices have gone up for experiences on Perfect Day at CocoCay, the cruise line's signature private island.
"And the demand not only is there from a volume perspective, but the rate is there. And that rate has been going up again in a very healthy way. And it's the same with the spend for the products and experiences on Perfect Day. We've seen a great demand and a lot of resilience as the prices go up," he added.
