Strong Demand Drives High Third Quarter Results for Royal Caribbean Group

Royal Caribbean Group has reported better than expected third quarter results and increased its full year guidance. The operator credited stronger close-in demand and strength in onboard revenue for much of the results.

“We are feeling very good about the business, the demand for our brands, the demand for our ships, and destinations. And we’re seeing that not only in terms of the daily interactions with our guests, but also the high level of booking activity and the strength we’re seeing in bookings,” said Jason Liberty, president and CEO of Royal Caribbean Group, during a third quarter financial report call with investors. “We have been booking at an accelerated pace really since early of this year.”

For the third quarter, the company reported net income of $1.0 billion, much higher than the net income of $33 million in the same period last year. The increase is driven largely due to the higher load factors, which for third quarter 2023 was at 110%.

Closer-in demand for 2023 sailings that exceeded expectations helped drive that load factor, as did greater-than-expected closer-in demand for 2023 sailings.

Liberty also gave credit to travel advisors. “Our travel partners are also delivering meaningfully more bookings than 2019 levels, and even beating our elevated expectations.”

Among the many passengers taking to Royal Caribbean Group brands in 2023 has been a “significant increase” in new-to-brand and new-to-cruise customers.

“In fact, in the third quarter, approximately two-thirds of our guests were new to cruise or new to brand, all while also doubling the repeat booking rate.”

Another contributor to the increased net revenue is higher rates, which in the third quarter were approximately 18% higher than compared to 2019.

Onboard spending
Consumer spending onboard, as well as pre-cruise purchases, continue to significantly exceed 2019 levels as well.

About a third of pre-purchased activities now come through the line’s mobile app. Furthermore, in the third quarter, about 70% of guests made pre-cruise purchases.

“In the third quarter, customers that purchased onboard experiences before their cruise spent two and a half times more than those who only bought once onboard,” Liberty said. “As we look into 2024, we have book over double the amount of pre-cruise revenue compared to this year.”

2024 forecast
Demand for 2024 continues to accelerate, with bookings significantly and consistently outpacing 2019 levels. Increased capacity and the addition of in-demand ships like Icon of the Seas, Celebrity Ascent, and Utopia of the Seas, as well as more short sailings to Perfect Day at CocoCay account for much of the future demand, Liberty said.

Despite some macro trends indicating an economic softening, Liberty said, “When we look closer at these trends and indicators related to our customers and their related behaviors and strong propensity to cruise, we see that many of these macro indicators are less relevant to our business.”

Across Royal Caribbean Groups’ three brands and customers, Liberty said the company continues to see “an exceptionally engaged consumer” across a broad range of demographics and psychographics with a median household of at least $125,000.

“Our customers’ sentiment is bolstered by strong labor markets, high wages, surplus savings, and elevated wealth levels.”

Liberty spoke briefly about 2024 capacity – which is growing by 8% – and deployment.

“Our deployment across markets is relatively consistent with 2023, with slightly more Caribbean, slightly less Europe, and a return to China for the first time in four years.”

Specifically, the company’s Caribbean capacity will represent about 55% of overall deployment, with Europe accounting for about 15%, Alaska accounting for 6%, and Asia-Pacific representing about 10%.