While the reports of Disney World's theme parks being empty this summer have been greatly exaggerated, the company and its Florida Rival Universal Studios have seen attendance dip. That could be because a trip to either of Florida's premium theme park destinations costs thousands of dollars just for tickets before you factor in food, hotels, and other extras.
Walt Disney (DIS) -) and Comcast's Universal Studios have suffered (at least a little) because people are worried about the economy. They still want to take vacations, but fears over inflation, rising housing costs, and perhaps losing their job has led some people to be a little more careful with their vacation dollars.
DON'T MISS: Royal Caribbean's President Shares Big News for Passengers
That has been a great benefit to cruise lines serving the same family customers as Disney and Universal. Royal Caribbean (RCL) -) has been a big winner building its business back up to pre-covid levels partially by being a good value compared to land-based vacations like theme park trips.
"There's also a pretty significant value gap to land-based vacations...We have that opportunity now to begin to close that gap. And that gap was about 15% to 20% pre-pandemic. Today, it's about 35% to 45%. And we're going to make, you know, a pretty good dent in it here in 2023," Royal Caribbean CEO Jason Libert shared in an interview in June.
Now, speaking during the cruise line's second-quarter earnings call, Liberty made it clear that higher prices are coming.
Image source: Daniel Kline/TheStreet
Royal Caribbean Has Been Drawing New Customers
At least partially due to pricing, Royal Caribbean has seen a steady increase in first-time customers.
"In the second quarter, the percentage of guests who were either new to brand or new to cruise surpassed 2019 levels by a wide margin, and we have seen post-cruise repeat booking rates nearly double 2019 levels," Liberty said.
Those customers could be coming at the expense of Disney World and Universal Studios. Royal Caribbean cruises, like Carnival Cruise Line (CCL) -), or MSC, offer meals, snacks, entertainment, and basic drinks as part of your fare.
$2,000 could get a family of four on a short cruise while $3,000 will (usually) buy a week on a higher-end Royal Caribbean (or Carnival or MSC) ship. That same amount of cash won't pay for Disney or Universal theme park tickets and lodging in most cases, and food will cost even more if you opt for the theme parks.
Cruising has been a major value, but Liberty does want that to change.
Royal Caribbean's CEO Sees Price Increase Opportunities
"While we have made positive strides in narrowing the gap to land-based vacations over the last several months, cruising remains an exceptional value proposition, allowing us to outperform broader leisure travel as we seek to further close the gap to land-based vacations, drive better revenue and welcome even more happy customers," he said.
Spending onboard has been increasing, but the CEO expects that to go even higher as well.
"Over the last few months, experience spend was up 25% compared to 2019 and double that of spending on goods. Despite this increase, spend on experiences remains lower than the long-term trend line, implying a multiyear catch-up opportunity," he said.
Higher prices compared to a theme park trip could tip some customers back to Disney and Universal.
Royal Caribbean has also made a move that in some ways supports Disney and Universal. It is moving one of its largest ships, Allure of the Seas, to Port Canaveral to sail short 3-4 day itineraries. That, in theory, entices people to fly to Orlando, spend some time at the theme parks, and combine it with a cruise.
The cruise line is leaning heavily into that strategy as its next Oasis-class ship, Utopia of the Seas, will sail those same short itineraries from Port Canaveral (which is about 90 minutes from Disney World).
"Utopia will be the first Oasis-class ship that will be entirely focused on short cruises in the Caribbean, supporting our strategy of competing with land-based vacation alternatives and driving new-to-cruise customers into our vacation ecosystem as we seek to close the value gap," Liberty added.
