Cruise Demand Has Returned To Pre-Pandemic Levels

By Graham Starr

(Bloomberg) –Royal Caribbean Cruises Ltd. said occupancy has rebounded to pre-pandemic levels, with bookings running higher than the third quarter of 2019.

The second-largest cruise operator reported third-quarter results Thursday that surpassed Wall Street estimates and said customer demand met 2019 levels for the first time since the Covid-19 pandemic shut down cruises.

“Our business is back,” Chief Executive Officer Jason Liberty said in an interview. “Our load factors are in the mid-90s. We’re inching our way back.”

Occupancy for the third quarter was 96% overall, beating Wall Street estimates of 92%. Adjusted profit came to 26 cents a share, above the 14-cent average of estimates compiled by Bloomberg. Revenue rose to $2.99 billion, compared with analysts’ projections of $2.97 billion. 

Royal Caribbean shares rose 8.3% to $53.77 at the close in New York, the stock is down 30% this year, compared with a 22% drop in the S&P 500.

The report buoyed the stocks of competitors Carnival Corp. and Norwegian Cruise Line Holdings Ltd. Carnival closed up 1.6% to $8.83 and Norwegian rose 3.9% to $16.99 at the close.

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Despite inflationary headwinds on fuel and food, Royal Caribbean said on a call that demand is strong. Its passengers tend to be high earners, with median household incomes greater than $100,000, and are less affected by current consumer spending challenges.

Costs are expected to rise in the fourth quarter, due to fuel expense and currency exchange rates, with management forecasting a loss of $1.30 to $1.50 a share. Other headwinds include a slower post-Covid rebound, particularly in China, where restrictions have virtually shut down travel.

“We don’t expect China to be a market for us in 2023,” Liberty said.

One change since 2019: Customers are making cruise reservations much closer to their trip, with 50% more bookings last quarter made for a trip in the same calendar year than in 2019. Customer demand for forward-looking trips also rose, with more bookings for the following calendar year than in previous quarters.

Royal Caribbean expects record yield in 2023, with customers spending more on bookings and on cruises than they did in 2019.

© 2022 Bloomberg L.P.

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