For a time after the cruise industry's Covid shutdown ended, only diehard cruisers seemed prepared to board ships.
Though the entire industry had taken meaningful steps to limit the spread of Covid, being in an enclosed space with a crowd seemed like something other people simply would not do.
Now, the Covid scare has largely dissipated and people's approach to cruising has changed. The industry will serve a record number of of passengers in 2024, and for Royal Caribbean, business has been booming.
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The cruise line has benefited from people wanting to travel and having the money to do so, but also being careful with their dollars.
Cruise prices have gone up, but taking a cruise is a tremendous deal compared with visiting a theme park or even a beach resort.
Your cruise fare includes not just your cabin but also entertainment and unlimited food. Yes, you can upgrade your dining, spend money on soda, alcohol, and fancy coffees, and buy all sorts of excursions, but even without all those extras, cruises still include more than traditional land vacations.
That's a big part of why Royal Caribbean CEO Jason Liberty says his cruise line has significant room to increase prices.
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Image source: Royal Caribbean
Royal Caribbean has room to grow
Liberty addressed his company's rising prices during its third-quarter-earnings call. He was responding to a question from Barclays analyst Brandt Montour.
"I want to take a sort of a broader look and ... talk about like-for-like pricing cumulatively [versus 2019] and just sort of level-set where you think you're at," Montour said.
"[If] you're still trailing sort of cumulative U.S. inflation, does inflation coming down next year act as some sort of governor a little bit [on] how strong yields can be? [How] do you think about that?"
Liberty's response was bullish.
"I think, first, just kind of starting off is when you compare [this year] to '19 levels, [the fourth quarter is up about 25%]. The year is up about 26% versus 2019 levels," he said.
The reasons go beyond just higher prices.
"When we look at that, there's a lot of things that are inside of that, which is not only just like-for-like growth," Liberty said. "It's not just the new capacity. It's also great assets like Perfect Day, fully normalizing within our business.
"And while there has been a lot of growth on the pricing standpoint, a little bit of growth on the occupancy standpoint, the trends show that we continue to be able to elevate demand, elevate pricing each day."
Liberty says inflation is not the driver.
"[What] you see in the overall trends is that we continue to see strong volumes — the customer's willingness to pay more," he said. "I don't think this is an inflation-related type of driver.
"I think the driver is that cruise or propensity of cruise is at a significantly high level. I think that the cruise experience is now considered to be a very mainstream vacation product."
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Price compared with other vacation options remains a major driver as well.
"There's still a significant value proposition versus land-based vacation," Liberty said. "[The] combination of really understanding what our guests are looking for and leveling up our business with our brands, meeting those expectations, the ships meet those expectations, the destinations [meet] those expectations.
"And having the tools and technology that really allow us to harvest quality demand ... is all leading to why we keep seeing outperformance on the yield growth side."
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