Royal Caribbean is making more money than it expected. The good and the bad news for cruisers

Despite all the challenges of the last few years, the cruise industry is red hot right now. So much so, it is advising its investors to expect a banner year.

Royal Caribbean Group expected 2024 to be a very good year, but it had to revise expectations because business is doing better than it predicted.

In just the few weeks since Royal Caribbean Group reported its 2024 earnings outlook, the company issued an update because of “robust demand.”

This is more than good news if you own stock. It points to many trends cruise fans should expect in the coming year and beyond.

The best wave season ever

Royal Caribbean isn’t just seeing high demand, it’s experiencing the hottest start to the year in its history.

Wave season is the industry term for the time of year between January and March where cruise bookings are usually the highest of the year. The name refers to the fact it acts as a wave to carry business through the rest of the year, similar to how an ocean wave carries water far out to shore.

In a filing on Friday, the company said the first 5 weeks of the year have had the best wave booking weeks in the company’s history.

In short, new reservations for the third and fourth quarters are better than the first two quarters by half.  More bookings in 2024 have been made for the year in quantity and pace. On top of that, more passengers are buying extras for their cruise at higher prices.

Royal Caribbean Group CEO Jason Liberty explained, “Since our last earnings call, robust demand for our vacation experiences has significantly exceeded our initial expectations.”

When a company files anything with Wall Street, it’s important.  For them to adjust forecasts of how much money they expect to make, it shows a significant rise in their business, especially just a few weeks since the forecasts were given.

Don’t expect cruise fare cuts

Royal Caribbean Group telling investors it will make even more money than it first advised should be a sign to anyone that going to book a cruise this year there’s plenty of other people competing for those cabins.

If you found cruise prices high in 2023 and were hoping for a reversal in price trends, it seems more unlikely now.

Mr. Liberty told investors on February 1st, there are half as many staterooms left in the first quarter of 2024 compared to the same time period in 2023.

When you combine sky-rocketing demand at higher prices, there’s little impetus to drop cruise fares much.

Cruise fare pricing depends on many factors, not just booking trends. However, it’s likely those tailwinds wont compel price cuts like the industry saw in 2020.

Updates and new ships are back

It’s not all bad news for consumers, because Royal Caribbean doing better financially has an ancillary benefit.

With Royal Caribbean Group expecting more cash, it means they have more financial flexibility. More cash means money to pay off the massive debt all cruise line accrued during the shutdown of 2020. But it also means they can afford to do more too.

One of the first things Royal Caribbean Group did when things went bad in 2020 was to cut capital spending, which is what the company calls big projects. This includes new cruise ships, refurbishments, and private island development.

As Royal Caribbean Group’s financials improved over the last two years, it has started to spend more.  It re-committed to a beach club in Nassau, and built and opened an adults-only expansion at CocoCay.

The best sign that Royal Caribbean Group is ready to spend big again is the fact it placed an order for a new Oasis Class cruise ship. Considering cruise ships cost easily a billion dollars, it’s unlikely they would voluntarily take on new debt if they didn’t think they could pay it all off.

Moreover, executives let slip they would amplify Allure of the Seas in 2025. Allure had upgrades planned for 2020, but it was cancelled (along with Explorer of the Seas, Liberty of the Seas, and Adventure of the Seas). 

These are all signs that Royal Caribbean Group seems poised to start spending on the things that cruise ship passengers love: new fun and fancy things to do. While nothing is certain, the fact they’ve started spending on big ticket items that were fiscally impossible just a couple years ago, says a lot.

Book now before prices go higher

If your goal is to go on a cruise this year or in 2025 or 2026, you’ll want to act quickly.

Given the trend of prices going up, booking a cruise early remains your best strategy, as opposed to waiting for last-minute deals.

Traditionally, sales on a last-minute cruise were a strategy cruise lines used to fill up ships to avoid having unsold cabins. 

Read more: I paid $99 per person for a Royal Caribbean cruise. Here’s what this cruise is like

Just like the reality of price drops being less likely, I think last-minute sales are equally improbable.

Booking a cruise more than a year in advance has always been a tried-and-true booking strategy, especially for new ships when they first become available to book.

As it gets closer to the sail date, more people book cruises and that means less cabins left to book and that tends to drive up prices.

While a last-minute deal isn’t impossible, given the current booking environment, I recommend booking a cruise early rather than betting on a good price in the final weeks before the cruise begins.