Royal Caribbean Passenger On-Board Spending Splurge Helps Lower Losses

25.08.2023 - 13:40 / skift.com / Royal Caribbean / North America / Dawit Habtemariam / Jason Liberty / Royal Caribbean Cruises

Royal Caribbean Group saw strong revenue growth driven by strong customer onboard spending and guests new to cruises in the first quarter, executives said in an earnings call on Thursday.

In the first quarter, onboard and pre-cruise purchases exceeded 2019 levels, a trend that has continued from last year. Two-thirds of Royal Caribbean guests booked some of their onboard activities in advance of their cruise, compared to 48 percent in 2019. Every dollar of guest spend pre-cruise translated into approximately $0.70 of incremental spend once on board, said Royal Caribbean CEO, President and Director Jason Liberty.

Other cruise companies are also seeing strong onboard spending. Norwegian Cruise Line Holdings experienced onboard spending higher than its 2019 level in its first quarter.

Executives noted there’s been a shift in consumer preferences from goods to experiences. In the first quarter, spend on cruise experiences rose 24 percent from 2019 and was double the spend on goods.

Royal Caribbean provided a record 1.9 million vacations in the quarter. Load factor stood at 102 percent despite higher pricing levels. The booking window has also returned to its pre-pandemic level.

The share of first-time guests, who are either new to brand or new to cruise,  have surpassed its 2019 level by a “wide margin,” said Liberty. ”The improvements we have made in our commercial capabilities have allowed us to capture quality demand and expand our share of guest wallet,” he said.

Demand has been strong across all products and markets, but demand has been “exceptional” from North America, said Liberty. Cruise search is up 15 percent from 2019, which has helped double the number of visitors to Royal Caribbean’s website.  

Total revenue for the quarter was $2.9 billion, up from $1 billion for the same quarter last year.  Net loss amounted to $47.9 million, compared to $1.2 billion in the same quarter last year. Adjusted EBITDA totaled $641.7 million, up from a loss of $549,654 in the same quarter last year. 

In addition to strong onboard revenue, the quarter”s performance was driven by stronger than expected demand for Caribbean sailings and improved pricing, said Chief Financial Officer Naftali Holtz.

The company has started to rebuild its operations in China, a valuable market for Royal Caribbean.  Net revenue from the Chinese customer is around the same level as an American and slightly higher.

“We’ve now started to rebuild our sales organization in China, and we expect, hopefully, by late spring, early summer to be back operating out of China,” said  Royal Caribbean International President and CEO Michael W. Bayley. 

Executives said they expect to achieve decarbonationziation milestones this year, which include the